Looking at JJ Buckner’s 3-Year-old Son’s Awesome Portfolio

Written by 
Polina Medianina
/
May 26, 2022

Answer: Samsung

Hover your cursor over the buildings and look at the connections between the companies
⬇️

JJ and Mason surrounded with shapes - phot

Honestly, I’m jealous of JJ Buckner’s kid because he started investing so young.

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If you are familiar with compound interest (if not, read this), then you know that time is your best friend in investing. The longer you hold and add, the more money multiplies itself. So if you play it smart with kids, they can become millionaires by the age of 18 and who wouldn’t want that?

Let’s take a look at what kind of investment choices an informed 3-year old makes:

Mason's solid 3-stock portfolio - photo

Not much to analyze here at first sight, but corrected for Mason’s age his portfolio is at Warren Buffett level, which makes me want to cry because (spoiler!) it performs better than my tech portfolio :((

Invest in Worms

One thing that stands out straight away is that Mason invests in things he likes: Caterpillar, McDonald’s, and Disney.

I like to walk through a certain list of questions with my clients, which you can also use to do health-checks of your portfolio.

Let’s pretend we have a conversation with a kid, and maybe JJ will ask his son these questions one day.

1. What kind of company would you like to buy? Maybe IT? Or financial?
       What is IT? I'll have cartoons and one BigMac, please.

2. Do you have geographic diversity in terms of assets?
       That’s for 8th graders.

3. Do you have balance in positions?
       I balance as much as I can.

4. Do you have free cash so you’re able to buy on drawdowns and to average positions?
       Daaaad….

5. Do you have price targets for each stock? How much growth do you want to achieve as a result?
       I wanna be as big as you!

6. What loss are you willing to suffer on an asset before you sell?
       I don’t wanna lose anything.

7. Anything else you’d like to add?
       I have worms.

That’s how I imagine we would talk, but jokes aside, let’s try to strengthen it, because 3 stocks is a great start but as Mason learns more about investing he might want to diversify his portfolio.

Taking Your Portfolio to the Next Level

When thinking about whether a portfolio is performing well, one of the most important things to look at is goals. In the case of Mason’s portfolio the goals are to teach him about investing and compound interest, and to create a fund for his education. With a long-term plan like that you can hardly go wrong with owning massive, stable companies that are all part of Dow Jones. But just as an exercise how would you go about fleshing out a basic yet decent portfolio like Mason’s one?

On a 1-year time frame Mason’s portfolio is underperforming (TTF is our portfolio, QQQ — Nasdaq index, SPY — S&P 500).

Note: let’s assume we bought all the stocks in this portfolio in the same proportions as in the spreadsheet some time ago (3 years, 1 year, from the beginning of 2022) and held them until today without rebalancing. TTF is the portfolio.

So if we had invested a year ago would have seen this result:

Cumulative return 1 year - photo

Here's the same for the last three years:

Cumulative return 3 years - photo

To make it more diversified, and hence stronger, let’s add some of Dad’s stocks to the portfolio. To take the best of both worlds: Lego from one and dividends from the other. 

I took stocks from this video about JJ’s dividend portfolio, added to his son’s one, and backtested it, too. 

JJ’s dividend stocks are the following:

JJ's dividend stock portfolio table - photo

Look how much better the performance is! It’s outperforming the S&P 500 by almost two times, even without big exposure to tech stocks. 

Cumulative return new 2 years - photo

If we take a closer look at this year, the results are even better. In 2021, JJ’s portfolio was underperforming (blue line), but when things got crazy in 2022, the portfolio proved to be more stable. 

Cumulative return new 1 year - photo

Takeaways

Overall, Mason’s portfolio is better than most portfolios of grown-ups — yes we mean that friend of yours who only invests in altcoins.

OK, let’s face it, his dad JJ really knows what he’s doing and is a great example of how parents can start their kids’ financial education from an early age.

Our favorite insight is that he didn’t just buy some tech company that’s growing now but instead found some things his kid is into and bought super solid businesses that will give him a big boost in his financial independence.

If you haven’t started investing yet, do the same exercise with your inner kid. Ask them what they like and buy companies that are good to build the foundation for your portfolio. Then build on top of that as you go and then the sky’s the limit.

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because I want to check what my friend has just sent me
The company developed and maintains technological products and services, namely Snapchat, Spectacles, and Bitmoji. Snapchat is the third most popular app among millennials and gets high profits from ads on the platform. Since TikTok is not available to invest in yet, Facebook is boring, we see Snap as a good choice to diversify your portfolio. We don’t know what keeps those kids so glued to screens in Snapchat but if companies profit from it, we can get a share thanks to investing in their stocks.
because xBox brings us together with friends
Microsoft is the second biggest company on the market in terms of capitalization. Xbox, Skype, Windows Office 365 are all part of Microsoft business as well as it develops, licenses, and supports a wide range of software products and services, as well as designs and sells hardware. The company’s future is as bright as it’s past with all the money the company invests in disruptive tools like AI. Next time you plan to buy another game for the Xbox console, you might also consider buying a Microsoft stock which is not very expensive.
because we want schools to be cooler
So we packed peanut butter and jelly sandwiches for the kids, now it’s time to go to school. The K12 Inc. is an educational technology company. The company offers a private education program, software and education services built to teach online for preschool students up to grade 12 or K-12. The company’s earnings soared up after the pandemic because we came to realise that online learning is not far in the future and may continue the trend.
because we like to treat our pets and ourselves, too
The American manufacturer of supermarket food JM Smucker Co also operates a pet food business including brands such as Milk-Bone and Meow Mix. It’s also the producer of the peanut butter JIF, kid’s all-time favorite filling. The company offers a 2.96% dividend yield and in the third quarter reported a 7% increase in net sales.
because we love playing games
If there is one game to teach you financial literacy - it’s Monopoly, which belongs to Hasbro, as well as unparalleled portfolio of approximately 1,500 brands including MAGIC: THE GATHERING, NERF, MY LITTLE PONY, TRANSFORMERS, PLAY-DOH, BABY ALIVE, DUNGEONS & DRAGONS, POWER RANGERS, PEPPA PIG and PJ MASKS, as well as premier partner brands. The company generates strong cash flows and pays regular dividends. The company’s business moves along the online trend and develops digital content in the form of TV shows, films, computer games.
because everyone has a favorite childhood hero
Disney is a widely diversified company which owns everything from toys to apparel, and books to video games: Disney Parks, ESPN channel, Pixar, Hulu and so much more. And now it bets on streaming services with Disney+ and threatens Netflix’s market share. The company revenue suffered a major drop last year due to closure of Disneylands, but has opened them in October and foresees a strong comeback.
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