2009-03-11 / The Motley Fool

Stocks vs. Bonds for Junior

Q Are stocks or savings bonds better for kids?

— H.K., Denver

A It depends. The stock market is best for long-term investments — at least five years, if not more. If the money will be spent on college, see how many years you have until your kids are 18. If it's for their future use as adults, it might grow for a few decades.

Putting short-term money in "safer," less volatile investments such as savings bonds or CDs will give you a modest return and minimize losses. But over most long periods of time, stocks will outperform bonds and CDs.

An index fund is a great way to start with stocks. You might also invest at least a little money in the stock of a few companies that your children know, such as McDonald's or Nike. Then you can follow the fortunes of the companies and your investments together, as they learn about the stock market.

Learn more about savings bonds at www.savingsbonds.com and about index funds at www.indexfunds.com and at www.fool.com/mutualfunds/ mutualfunds.htm.

Q What does it mean when I see that "Today's Volume" for a stock is 16,300,000?

— P.W., Batavia, N.Y.

A Imagine the Scandinavian drug maker, Fryyndar and Ulf Pharmaceuticals (ticker: GULPP), whose motto is "Varsågod och svälj!" (That's Swedish for "Here, swallow this pill!"). If its current volume is 16,300,000, that just means that so far today, 16.3 million shares of the stock have changed hands. Volume can vary widely — IBM averages about 10 million shares per day, vs. 1.7 million for Burger King. If a stock's volume is much higher than its average, then something is probably going on, such as good or bad news.

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