16 year old's account - what to invest in?

[Deleted]

My son  16 year old - likes new fintechs - Affirm, upstart etc.

I am tending towards SP500 (VOO) and MGK etfs.

I will give him couple of thousand to play with Fintechs or bitcoins/ethe. There is new fintech etf too - GFOF.

But that still leaves 10k to invest  into something else? What do you recommend for 16 year olds?

He got gift from his Grandfather.

[johntaylor]

My first stocks in that age range were relatable -- Coke, Pepsi, McD's, etc. So perhaps something a kid today would know?

[alvinthechipmunk]

.......If you can actually make him follow-through, at that age? After decades and into retirement, he could be rather well off!

I'm thinking BROKERAGE houses. Not their mutual funds, but investing in their STOCKS.
TROW (despite stinky customer service.)
SCHW

CONCRETE: CX
ENERGY: COP is over-priced, just now.
UTILITIES: AQN is just a bit over-valued at the moment. But 4.83% dividend.
Chips: TSM. Quite a discount presently re: Fair Value.
BANKS: UMPQ, BNS.
TECH: AAPL, but it's way over-priced. 

DIVERSIFICATION, eh?
Or: RPGAX, VGWLX PRBLX

Bonds? Nope, too young, at 16. @waffle ,

[javajoe]

My 12 year old has held VT and only VT in her Roth IRA since inception (about 3-4 years). I don't anticipate her needing/wanting any other holding until she starts to show greater interest in AA, active trading etc. About twice a year we look at the top 10 holdings so she can identify and connect with the brands she knows and likes.

It's pretty hard to beat broad global equity exposure for 8 bp.

[retiredat48]

@waffle ,…enjoy:

R48's ROADMAP...Part I...Getting Started


I have been providing guidance on the PD/M Forum to young accumulators, or to anyone with lets say from $3000 to $20,000 to invest, or simply just starting from zero. But my discussions with this group has altered even my way of thinking on the approach they should take. And a few things have changed in the brokerage world, all for the betterment of young investors.

I have concluded that the most important thing for young investors is that the learning experience trumps everything...from maximizing performance, to safe performance. And now I think that learning can be done at zero cost, nor with any serious harm to the portfolio results. Let me explain.

Until recently, young investors were hamstrung with minimum initial mutual fund investment amounts (often $3000 and up). So the standard advice was to perhaps go into target retirement funds, or total stock market, or perhaps one or two actively managed funds. I think those times are past.

We know from various studies and analysis of successful portfolios is that things like asset allocation, determining stock/bond mix, percent international, and choices among the nine Morningstar style boxes are much greater determinants of success, than fund selection. Arguable, yes.

But here's what's new. First, we have tremendous education and literature on selecting the asset allocations. Second, we have computers, tax deferred investing spaces and recently, exchange traded funds where commissions are zero. IN FACT, FIDELITY HAS NOW MADE AN ASSET CLASS SPECTRUM OF iSHARES ETF's AVAILABLE WITH ZERO COMMISSION. DITTO FOR VANGUARD FOR ALL IT'S VANGUARD ETFs. My personal selection would be to start with Vanguard.

So the last hurdle for young investors is now removed.

Thus, an investor with $10,000 can easily get a full asset allocation plan underway, putting $1000 into etfs, and some mutual funds if desired, and start on day one watching, managing and learning about their portfolio and investing. Ditto for adding new money.

If such an investor makes a mistake, such as a 30% loss in one of his/her selections, so what. You are only out $300. A great way to learn about investing. And if you get a bear market, you will experience it with a much smaller amount, and can thus calibrate your real tolerance for losses, or risk, and adjust the bond percentage, or your style, accordingly.

Furthermore, I have come to conclude young people really can adjust much faster to things like investing in ETFs, and asset allocation models. They understand computers, electronics, gadgets, buying on-line, etc. I think they grasp ETFs very quickly. So I am optimistic you can now start at a very early age and come up with an approach to investing that fits your personality, or psyche, or whatever you call it, but we know what it means. With experience, you can eventually graduate into buying some Closed End Funds, especially for fixed income boosts.

So to the young investors and smaller dollar accumulators, you can ponder these approaches. But do some homework and reading on the newer developments in the fields of portfolio management and theory. Get familiar with term like the "efficient frontier of portfolio makeup."

For me personally, I lean towards the academics on portfolio design, and towards the risk mitigators in portfolio management (discussed on the PD/M Forum). Some lean towards mostly actively managed funds. Some lean toward no actively managed funds; others mostly buy and hold with rebalancing.

Thus, consider going to Vanguard (or Fidelity) and get started.

—————————

R48

[Capital]

I put my two in a Total US Stock Market fund. An S&P Fund would probably do the same.
With a 50-year time horizon it will be hard to fail as long as you stick to equities. 

JMHO 

[Mustang]

What is the investment for? If it is for college then the withdrawals are only a couple of years away. I cannot see the future but if today's market is at the peak then the market could be at the bottom when he is 18. If its a longer term investment then he could ride it out.

[steelpony10]

@waffle ,

     Core (long term hold) - VOO or VTI. I believe MGK might serve as an index to tilt the core (if VTI) towards growth. We use VTI, VUG. 

      Explore - investing foundation = www.betterinvesting.org/

      Hopefully if your son doesn’t show interest at all long term he just adds to that account as he would a savings account. Keep him away from the daily high, market timing, gambling crowd. I have one son that’s a tech millionaire at 40 and one who’s a market timer who lives at a much lower economic level. One got it in an hour over a lunch lecture the other apparently  “thinks” better then everyone. The long term results are pending but it is my hope he’ll come around eventually. Lol.

       

      

[fritzo489]

Is it possible to set up individual  accounts  for two grand kids,  where both , myself + grand child, can add to account & NO withdrawals until a set  date ?  Both are young adults.

                                                                               Thanks, fritzo489

[steelpony10]

fritzo489 ,

            We have a living trust set up for probate purposes and to disperse any remaining assets various ways when we pass. When/if you ever deal with LTC joint accounts like that should be up for grabs before Medicaid pays anything.

             If they have a Roth you can contribute towards the allowable amount. I don’t know how you can gift money and control how it’s spent or managed after age 18 unless it was inherited as a minor and held in trust to age 25 for example. At some point it’s all theirs. So consult the experts. 

             

             

[retiredat48]

If the teenager has any income (even stuff like lawnmowing or babysitting money), then do them a big favor and start/fund a ROTH IRA for them. This will grow to millions by their age 60. You must have "earned income" to fund IRAs. Kids file tax returns showing contributions.  Note IRAs DO NOT COUNT towards kids college financial aid applications.  Expected withdrawal is zero.  If they have money in taxable, much of it may be consumed in paying for college.

Disclosure: I started Trad IRAs for each of my three daughters, at their age 12, for about a decade each. Now about age 50's, they are planning retirement in a few years. One is already financially independent, and only her helping the North
Carolina Hospital at Chapel Hill campus tackle covid keeps her working. She recently turned down a manager of Hospital QA job, as she wants to spend more time with family, and will be "retiring at age 53...per plan"...as youngest heads off to college.

R48

[fritzo489]

steelpony10, retiredat48,

Thank you, I'll set something up when I return from being a snowbird.

[Capital]

Feb 6, 2022 0:50:40 GMT retiredat48 said:

If the teenager has any income (even stuff like lawnmowing or babysitting money), then do them a big favor and start/fund a ROTH IRA for them. This will grow to millions by their age 60. You must have "earned income" to fund IRAs. Kids file tax returns showing contributions.  Note IRAs DO NOT COUNT towards kids college financial aid applications.  Expected withdrawal is zero.  If they have money in taxable, much of it may be consumed in paying for college.

Disclosure: I started Trad IRAs for each of my three daughters, at their age 12, for about a decade each. Now about age 50's, they are planning retirement in a few years. One is already financially independent, and only her helping the North
Carolina Hospital at Chapel Hill campus tackle covid keeps her working. She recently turned down a manager of Hospital QA job, as she wants to spend more time with family, and will be "retiring at age 53...per plan"...as youngest heads off to college.

R48

I have created and funded Roth IRAs for both of my children. I pay them for jobs around the house in addition to what they pick up from neighbors and family. I file a tax return for them with a Schedule C for this income - so far neither has paid much if any income tax. What really caught my attention is the growth factor. Using the rule of thumb that the stock market doubles roughly ever 7 years in the long term a $2k contribution to a 15-year old's Roth IRA will grow to roughly $254k in their late 60s. Do this 4 times and you have given your child over $1M in a Roth IRA for retirement at a current cost of $8k. Just think what that would have done for your retirement planning.   

[retiredat48]

Feb 6, 2022 11:34:53 GMT Capital said:

Feb 6, 2022 0:50:40 GMT retiredat48 said:

If the teenager has any income (even stuff like lawnmowing or babysitting money), then do them a big favor and start/fund a ROTH IRA for them. This will grow to millions by their age 60. You must have "earned income" to fund IRAs. Kids file tax returns showing contributions.  Note IRAs DO NOT COUNT towards kids college financial aid applications.  Expected withdrawal is zero.  If they have money in taxable, much of it may be consumed in paying for college.

Disclosure: I started Trad IRAs for each of my three daughters, at their age 12, for about a decade each. Now about age 50's, they are planning retirement in a few years. One is already financially independent, and only her helping the North
Carolina Hospital at Chapel Hill campus tackle covid keeps her working. She recently turned down a manager of Hospital QA job, as she wants to spend more time with family, and will be "retiring at age 53...per plan"...as youngest heads off to college.

R48

I have created and funded Roth IRAs for both of my children. I pay them for jobs around the house in addition to what they pick up from neighbors and family. I file a tax return for them with a Schedule C for this income - so far neither has paid much if any income tax. What really caught my attention is the growth factor. Using the rule of thumb that the stock market doubles roughly ever 7 years in the long term a $2k contribution to a 15-year old's Roth IRA will grow to roughly $254k in their late 60s. Do this 4 times and you have given your child over $1M in a Roth IRA for retirement at a current cost of $8k. Just think what that would have done for your retirement planning.   

My bold added above....YES, I did think about; and I also did it!  Except it wasn't a ROTH, because I don't think it was available then.

Good job with your kids, capital.  

R48

[FD1000]

Feb 6, 2022 11:34:53 GMT Capital said:

Feb 6, 2022 0:50:40 GMT retiredat48 said:

If the teenager has any income (even stuff like lawnmowing or babysitting money), then do them a big favor and start/fund a ROTH IRA for them. This will grow to millions by their age 60. You must have "earned income" to fund IRAs. Kids file tax returns showing contributions.  Note IRAs DO NOT COUNT towards kids college financial aid applications.  Expected withdrawal is zero.  If they have money in taxable, much of it may be consumed in paying for college.

Disclosure: I started Trad IRAs for each of my three daughters, at their age 12, for about a decade each. Now about age 50's, they are planning retirement in a few years. One is already financially independent, and only her helping the North
Carolina Hospital at Chapel Hill campus tackle covid keeps her working. She recently turned down a manager of Hospital QA job, as she wants to spend more time with family, and will be "retiring at age 53...per plan"...as youngest heads off to college.

R48

I have created and funded Roth IRAs for both of my children. I pay them for jobs around the house in addition to what they pick up from neighbors and family. I file a tax return for them with a Schedule C for this income - so far neither has paid much if any income tax. What really caught my attention is the growth factor. Using the rule of thumb that the stock market doubles roughly ever 7 years in the long term a $2k contribution to a 15-year old's Roth IRA will grow to roughly $254k in their late 60s. Do this 4 times and you have given your child over $1M in a Roth IRA for retirement at a current cost of $8k. Just think what that would have done for your retirement planning.   

Good idea until you realize it's 45 years. You can't predict what your kids will do in the next 20 years.
This is why I invested it all in our(wife+me) accounts. Never 529 or anything on the child name. We paid for the 3 kids university, but made sure they study a subject they can use. There no such a thing as "I need to find myself"   and spend our money.
We control our money too, we know how to that very well.

Any of them need advice on any financial matter? Absolutely.
Down payment for one kid first real estate? sure.

They will start getting money when we get very old and get much more at death.  There is saying in my old/previous country: "one father can support 10 kids, but 10 kids can't support one father".  Looks to me as a smart and time tested idea.

BTW, I'm thinking of using an ATM on my grave. Each kid can only take $1000 per week, it's a sure way my kids will visit me.

[retiredat48]

Feb 7, 2022 0:42:10 GMT FD1000 said:

Feb 6, 2022 11:34:53 GMT Capital said:

I have created and funded Roth IRAs for both of my children. I pay them for jobs around the house in addition to what they pick up from neighbors and family. I file a tax return for them with a Schedule C for this income - so far neither has paid much if any income tax. What really caught my attention is the growth factor. Using the rule of thumb that the stock market doubles roughly ever 7 years in the long term a $2k contribution to a 15-year old's Roth IRA will grow to roughly $254k in their late 60s. Do this 4 times and you have given your child over $1M in a Roth IRA for retirement at a current cost of $8k. Just think what that would have done for your retirement planning.   

Good idea until you realize it's 45 years. You can't predict what your kids will do in the next 20 years.
This is why I invested it all in our(wife+me) accounts. Never 529 or anything on the child name. We paid for the 3 kids university, but made sure they study a subject they can use. There no such a thing as "I need to find myself"   and spend our money.
We control our money too, we know how to that very well.

Any of them need advice on any financial matter? Absolutely.
Down payment for one kid first real estate? sure.

They will start getting money when we get very old and get much more at death.  There is saying in my old/previous country: "one father can support 10 kids, but 10 kids can't support one father".  Looks to me as a smart and time tested idea.

BTW, I'm thinking of using an ATM on my grave. Each kid can only take $1000 per week, it's a sure way my kids will visit me.

I explained to my kids...OFTEN...that if they take the IRA money and spent it, they would be written out of the will-categorically.  So far, this has worked.

Husbands also signed pre-nuptial agreements!

R48

[Deleted]

This discussion is very relevant for me as my kids will have some earned income this year.

[johntaylor]

Might be worthwhile to have a distinct thread on funding college for kids.

My parents paid $0.00 of my college education.