When Amy Peterson checked her daughters' investment accounts last week, she had a moment of parental pride—followed quickly by a bruised ego.
Her 8-year-old's portfolio wasn't just doing well. It was absolutely crushing both the S&P 500 and Amy's own carefully managed investments. By almost 7 percentage points.
"I have an MBA and fifteen years in finance," Amy told me, laughing as she showed me the statements. "My daughter still believes in the Tooth Fairy."
The young investor—whose name Amy asked me to withhold for privacy reasons—started with just $200 when she was 4. With regular $50 monthly contributions (birthday and holiday money, mostly), her UGMA account has ballooned to $4,535.56, including nearly $1,400 in pure profit.
That's a 44.97% return. During the same period, the S&P chugged along at a respectable-but-inferior 40%.
So what's the secret sauce? Well, it's not exactly rocket science.
Look, I've interviewed fund managers who use complex algorithms and teams of analysts to pick stocks. This kid's strategy? She invests in stuff she likes.
Her portfolio reads like a child's Christmas wishlist transformed into ticker symbols. Heavy on tech companies she recognizes (NVIDIA up an eye-popping 929%, Netflix at 458%, Google at 83%), with surprising diversification into brands that make products her family uses.
"She picked Marriott because we stayed at one on vacation and she loved the pool," Amy explained. That childish logic netted a 75% return.
Her little sister—just 5—is also beating market benchmarks, though by a more modest 4%. It's enough to make you question everything you thought you knew about investing.
The phenomenon reminds me of investment clubs in the 1990s where grandmothers outperformed hedge funds by buying companies whose products they used. Peter Lynch famously called it "investing in what you know." These kids are taking it to an extreme.
What's perhaps most instructive is what these child investors aren't doing. They're not...
• Checking CNBC every fifteen minutes • Panic-selling during market dips • Overanalyzing quarterly earnings reports • Second-guessing their convictions • Trying to time the market
Instead, they're making simple, conviction-based choices and—this is critical—giving those investments time to grow. Their time horizon isn't next quarter; it's practically forever in their minds.
When I mentioned to Amy that some might attribute her daughters' success to simply being in a bull market where tech stocks dominated, she nodded.
"Sure, that's part of it. But they're still beating both the market and my diversified portfolio. And I'm supposed to know what I'm doing."
There's something deeply humbling (and perhaps instructive) about watching children succeed through strategies that professional investors would dismiss as naive. It echoes Warren Buffett's observation that business schools reward complexity over simplicity, despite the latter often proving more effective.
Of course, I'm not suggesting we hand our retirement accounts over to elementary school students. Though Amy joked she's considering hiring her daughters as consultants.
"At the very least," she said, "I've started asking their opinions before making my own trades. My 8-year-old told me to buy more NVIDIA last year. I didn't listen. That was an expensive mistake."
Perhaps the best investment lesson here isn't about specific stock picks but about approach. Sometimes the uncorrupted perspective of a child—free from the biases and complexities we've convinced ourselves are essential—sees what Wall Street misses.
And that might be worth more than an MBA from Wharton.
