Question Re Investments

[logicallefty]

Question for you guys who are into investments and know more than I do: I have several grand in a savings account for my daughter. She is 14 now and when she is 18-21 + proves to me she is responsible with money, I am giving it to her. Been saving it since her 1st birthday. I want to stick it somewhere where it can sit for the next 4-7 x years and make some gains. I was considering a mutual fund or ETF. I'd like to see it earn 5-10% realistically. Any suggestions on the general type of fund? (you don't need to give me an exact fund name although I would research it and consider it if you did)

Thanks much fellas.

 

[Bible_Belt]

You've got to take a risk with your principal investment if you want to get any decent percentage gain. And if you want to pull the money out in five years, then this is like investing for a 60 y/o, not a young person.

I've never been a fan of funds. I've always thought I could do a better job of picking stocks than any fund, and not because I'm better than the fund manager, but simply due to all of the constraints placed on him by the massive size of the fund. It's like racing a toy boat against an aircraft carrier across a swimming pool. The little guy is going to win the race when it is very short.

Look up The Geo Group, nyse: GEO. They own the private prisons that house ICE detainees. I'd take that stock over any fund right now. Sessions just issued an order to basically roll back The War on Drugs, so the Federal prison population is going to start to swell. There are a lot of private contractors and companies who make money when that happens. That is where I would put my money right now, at least for the next few years.

 

[logicallefty]

@Bible_Belt thanks much man that does sound like a good potential one right there. If I got it I'd just make sure to sell it before the next election in case Trump looses and all the detainees get set free. That should hopefully be the perfect time anyway.

 

[Tenacity]

Question for you guys who are into investments and know more than I do: I have several grand in a savings account for my daughter. She is 14 now and when she is 18-21 + proves to me she is responsible with money, I am giving it to her. Been saving it since her 1st birthday. I want to stick it somewhere where it can sit for the next 4-7 x years and make some gains. I was considering a mutual fund or ETF. I'd like to see it earn 5-10% realistically. Any suggestions on the general type of fund? (you don't need to give me an exact fund name although I would research it and consider it if you did)

Thanks much fellas.

I would make your life easy and recommend just doing The Wellesley Fund: https://personal.vanguard.com/us/funds/snapshot?FundId=0027&FundIntExt=INT. The expense ratio is very low and you will get a balanced mix of 40% Stocks and 60% Bonds.

- Or, you could do the Wellington Fund https://personal.vanguard.com/us/funds/snapshot?FundId=0021&FundIntExt=INT. Expense ratio is very low and this one is 65% Stocks and 35% Bonds.

- Or, you could put 50% of the amount in an S&P Index Fund and 50% of the amount in a Total Bond Index Fund, but you would need $6,000 at a minimum ($3,000 to open each fund). With the Wellesley Fund or Wellington Fund, you just need $3,000 to open those.

Opening your account with Vanguard is very easy.

 

[switch7]

Question for you guys who are into investments and know more than I do: I have several grand in a savings account for my daughter. She is 14 now and when she is 18-21 + proves to me she is responsible with money, I am giving it to her. Been saving it since her 1st birthday. I want to stick it somewhere where it can sit for the next 4-7 x years and make some gains. I was considering a mutual fund or ETF. I'd like to see it earn 5-10% realistically. Any suggestions on the general type of fund? (you don't need to give me an exact fund name although I would research it and consider it if you did)

Thanks much fellas.

My advice would be go with a fund made up of mostly bonds. Regarding stocks I prefer stock indices to individual stocks as they are more stable. Though saying that, we are well over due a long term retracement on all the major stock indices at the moment, the way they are moving at the moment is kinda scary, getting more and more parabolic. Anyway the guys that manage these funds know what they are doing. Go with something that is fairly low yield and low risk. I like the Wellesley fund that Tenacity pointed out.

 

[BeExcellent]

Many of you know I'm in rental real estate.

This is what I am going to do for my kids as they come of age, and this was recommended to me by my CPA (it's what he did with funds slated for his daughter.)

Buy a rental house that will cash flow with that money. Teach her how to manage it, let her do the books on it.

When she reaches the age of consent you give her the property and associated cash flow. Keep in mind this is an illiquid asset. Extremely important. She can't dump it for cash on a whim to hitch hike across the country with some boyfriend you don't like. If she sells she won't have the money immediately even with a relatively quick sale...and this is a built in safe guard against the impulsiveness of youth.

She can dump any financial investment you give her in a day and go blow the money (which she very likely will not respect since she didn't earn & save it).

The only thing better is a trust structure where she does not have access to the money.

Don't set her up with a great big piggy bank of mad money. You'll be sick sick sick when *POOF* it vanishes on a whim.

 

[Bible_Belt]

When she reaches the age of consent you give her the property.

Wouldn't there be a gift tax liability?

 

[logicallefty]

I really appreciate everybody's reply so far. And I welcome more that may come.

@Tenacity you mentioned Vanguard. I have an account with Fidelity. Any insight on the pros and cons or comparison of each?

 

[BeExcellent]

Wouldn't there be a gift tax liability?

Not if you hold in an LLC and she is added as a member. There are work arounds for this. I good tax professional should be consulted obviously.

 

[Tenacity]

I really appreciate everybody's reply so far. And I welcome more that may come.

@Tenacity you mentioned Vanguard. I have an account with Fidelity. Any insight on the pros and cons or comparison of each?

I prefer Vanguard personally as they have just a more wide selection of Index Funds and they created the entire "indexing" concept. Fidelity has some good options too, but I'm a Vanguard guy