Do you think your teenager or some teenager you care about would be interested in pocketing $1,000? Yes? We thought so. It's not necessarily a pipe dream -- we're offering $1,000 to a clever teen. Here's the deal: In our 2002 book (check it out on Amazon or at your local bookstore -- it's received pretty good reviews), The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of, we announced an ongoing contest:

"We've decided to launch a $1,000 annual grant for the next five years for the most eloquent and effective advice on personal finance, investing, or business offered by a teen submitted to our teen discussion board. It could come from you, could it not? If you'd like to compete and learn from others, then contribute (as many times as you like) your best financial thoughts on the Teens board and take a chance at winning $1,000 for being a talented communicator of financial advice. (Remember, we offer a 30-day free trial to check out our boards. So don't delay. This could be the first $1,000 you invest for your future.)" Learn more about the contest.

Our most recent winner
The winner of the contest for 2005 is 14-year-old Alex Bossert of Minnesota. He posted his winning entry on our Teens and Their Money discussion board. You can read the whole post there, and check out some excerpts below. His post was titled "10 Reasons for Underperformance, and a Few Stock Market Myths." I'll put his words in italics.

1. Don't follow the crowd. Alex described the "Tulip Craze" of the 1600s, where people paid the modern-day equivalent of many thousands of dollars for single flower bulbs. This is not so different from what many of us investors did with Internet stocks in the late 1990s.

2. Keep transaction and brokerage costs low. I was not too thrilled to find out that in my Scottrade account, my total transaction costs for my three and a half years of investing amounted to over $400. Considering that I have only $6,000 invested, that's about 7%. No, I am not a day trader; I actually make about one trade every month. That's not a lot of trades, but they really add up. He went on to point out how costly excessive trading can be.

3. Diversification. Alex explained how he has nearly 50% of his nest egg in one stock -- that of Warren Buffett's Berkshire Hathaway (NYSE:BRKa) -- and that it offers good diversification: ... it has over 30 operating subsidiaries in very diverse industries, almost all of these companies were bought cheap and are great businesses, such as GEICO Auto Insurance, Dairy Queen, and many more. He added: I know lots of people who try to buy at least one stock in every industry. I don't believe in this. I [would prefer] owning between 3-9 different companies that you can understand and keep track of. I think it would be fairly hard to keep track of 100+ stocks at a time.

4. Investing in mutual funds. Alex pointed out some of the problems with many mutual funds and recommended, as we've long done, that ... If you [don't enjoy selecting and investing in individual stocks] or your results were poor, no harm done -- selecting stocks is not for you. Get yourself an index fund and stop wasting your time on stock picking.

5. Do your homework. This 14-year-old has a better handle on how to find winning companies than most of us investors. Read his whole post for details.

6. The Efficient Market Theory. Alex again comes off as quite sensible, seeing much efficiency in the market, but not perfect efficiency. He offered this tidbit: An old joke has two financial professors walking along the sidewalk when one spots a $20 dollar bill and bends over to pick it up, the other grabs his arm and says, "Don't bother. If it was a really $20 dollar bill, someone would have taken it already."

7. Using beta to determine risk. Alex offered The Washington Post Co. (NYSE:WPO) as a good example of why beta is flawed as an investing indicator: In 1973 it was selling for $80 million in the market. At that time, you could have sold all the assets of the business to any one of 10 buyers for over $400 million. The same properties are now worth over $2 billion. So the buyer at $400 million would not have been crazy. Now if the stock had declined even further to, say, $40 million, the beta would have been greater. For those of you who think beta measures risk, the cheaper price would have looked a lot more risky. This is truly Alice in Wonderland. I have never been able to figure out why it is riskier to buy $400 million worth of assets for $40 million than $80 million. (Example taken fromThe Intelligent Investor).

Click into our discussion board, where you can read the rest of Alex's winning entry.

Calling all parents, teachers, and friends
If you know any teenagers, I invite you to forward this article to them, or at least tell them about our contest. (You can forward this or any Fool article by clicking the "Email this Page" link at the bottom of this page.)

How to enter
Entering is simple. You can email your entry to us at this address. Or better still, post it on our Teens and Their Money discussion board, so that others can read and react to it. You can also see what other teens are saying about how they manage their money.

The financial advice or ideas you submit might be about:

  • saving money
  • earning money
  • starting a business
  • investing in the stock market
  • avoiding financial mistakes
  • or something else -- perhaps something we haven't even thought of!

More resources for teens
You can also help teens get a financial headstart in life by pointing them to some other helpful resources. Here are a few, starting with a book and a nook:

Go ahead -- help make someone a millionaire!

Selena Maranjian is no longer a teenager and regrets that she didn't start investing until her 30s. At least she'll never have to take another gym class, though. She owns shares of Berkshire Hathaway and The Washington Post Co . For more about Selena, view her bio and her profile. You might also be interested in The Motley Fool Money Guide, a book she wrote. The Motley Fool is Fools writing for Fools.