Posted: 9/8/2011 10:37:49 AM EDT
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So I know some of you guys are into high finance and are evidently good with investments and such.
If you would, I have a what if situation for you: Let's say that you have $50K to invest for your kid and you want it to be a "safe" investment for the next 10 years; what would you suggest? Since I'm not in the know; and I'm pretty sure that the Vegas idea and the $50K in powerball and scratch-off tickets aren't going to be a viable option  ;
do you have any suggestions? Hookers and blow aren't an option either. I thought of that one also. I know the Federal Home Loan security is supposedly a "safe" choice but almost no gains. I know that a number of retirees like the American Fund and the Janus Funds. That's pretty much it. Thanks for your input. |
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I would put it in an S&P500 index fund at a place like Vanguard...then let it ride. A lot of people will say "that's crazy" (and yes, my base portfolio holding is the S&P500 and yes, it's been the equivalent of flat over the past ("lost") decade) and then say something like gold (or whatever) is what you should really get.
Two points: 1) the idea isn't to beat the market (since no matter what people say, the market is rarely beaten even before transaction costs and taxes are accounted for) it's to accept what the market gives you. What is that? An average of about 10% annually. So if the next 10 years are anything like the last 50 years (or so) since the S&P500 was created, your $10k should be worth about 2.5 times as much in 10 years. 2) index funds in general (and Vanguard in particular) tend to have lower management fees (since they aren't actively managed) and costs which means you keep more of your money working for you rather than being siphoned off by the investment firm. If your objective is to establish something like a college fund, then a 529 plan is the way to go. Hope this gets you started. |
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No question, if you qualify, a 529 education savings plan. No matter whether the kid goes to trade school or a university, and goes on their dime, the kid will need training in some skill. Other than that, right now I wouldn't put more than half in the S&P 500 fund, or any other fund right now. If you do stick it in one fund, you're going to need some guts in order to watch the value drop by thousands during some periods along the way. |
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Quoted:
No question, if you qualify, a 529 education savings plan. No matter whether the kid goes to trade school or a university, and goes on their dime, the kid will need training in some skill. Other than that, right now I wouldn't put more than half in the S&P 500 fund, or any other fund right now. If you do stick it in one fund, you're going to need some guts in order to watch the value drop by thousands during some periods along the way. In my opinion a 529 is a great idea for some of that money. Nothing compares to the ROI due to a quality education. If you are a grandparent, a 529 is not such a good idea for your grandchildren (unless you gift it to them and have it immediately placed in a 529)... |
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All 529s are not alike.
In 2005 Forbes ranked Alabama's 529 among the worst. The other option, the Prepaid Affordable College Tuition Program (PACT) plan also turned out poorly for the holders. Don't just throw money blindly at a 529. Do your homework. |
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Quoted:
No question, if you qualify, a 529 education savings plan. No matter whether the kid goes to trade school or a university, and goes on their dime, the kid will need training in some skill. Other than that, right now I wouldn't put more than half in the S&P 500 fund, or any other fund right now. If you do stick it in one fund, you're going to need some guts in order to watch the value drop by thousands during some periods along the way. Two comments: 1) buy it and forget it (so you really aren't worried about it). You only care what the value is 10 years down the road. 2) Having the guts to ride it out is pretty much true of any investment these days. Precious metals: never been a big fan; they have their place, but not as a core holding. Bonds: interest rates are essentially zero = now is not the time to buy bonds. Real estate: yea, but it's probably too early to really go into the market and it's probably beyond the scope of what a parent is going to buy for a child. Cash = <0 return. The stock market is really the only viable investment vehicle IMO...and hey, stocks look cheap these days! If my dad were going to put $50k away for 10 years for me, I'd bet on the S&P. You could go with a broader index, but you are starting to include companies with higher risk and further away from the "core" of America. If you can't bet on the 500 largest companies in America, what is left to bet on? OK, there's China and India, who I'm really betting on, but you know what I mean. Granted, we are in for some "interesting" financial times ahead, but I truly believe that a majority of Americans are done with the "hope and change" experiment and things are going to be going in the right direction in the near future. |
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Quoted: Quoted: No question, if you qualify, a 529 education savings plan. No matter whether the kid goes to trade school or a university, and goes on their dime, the kid will need training in some skill. Other than that, right now I wouldn't put more than half in the S&P 500 fund, or any other fund right now. If you do stick it in one fund, you're going to need some guts in order to watch the value drop by thousands during some periods along the way. Two comments: 1) buy it and forget it (so you really aren't worried about it). You only care what the value is 10 years down the road. 2) Having the guts to ride it out is pretty much true of any investment these days. Precious metals: never been a big fan; they have their place, but not as a core holding. Bonds: interest rates are essentially zero = now is not the time to buy bonds. Real estate: yea, but it's probably too early to really go into the market and it's probably beyond the scope of what a parent is going to buy for a child. Cash = <0 return. The stock market is really the only viable investment vehicle IMO...and hey, stocks look cheap these days! If my dad were going to put $50k away for 10 years for me, I'd bet on the S&P. You could go with a broader index, but you are starting to include companies with higher risk and further away from the "core" of America. If you can't bet on the 500 largest companies in America, what is left to bet on? OK, there's China and India, who I'm really betting on, but you know what I mean. Granted, we are in for some "interesting" financial times ahead, but I truly believe that a majority of Americans are done with the "hope and change" experiment and things are going to be going in the right direction in the near future. I think a conservative strategy is useful right now, especially with a 10 year window. I'm biased by looking to retire in less than 10 years, but looking back on the last 12 and the current state of affairs, I wouldn't want anyone to get real cavalier unless they're looking out to 20 to 30 years. |
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No question, if you qualify, a 529 education savings plan. No matter whether the kid goes to trade school or a university, and goes on their dime, the kid will need training in some skill. Other than that, right now I wouldn't put more than half in the S&P 500 fund, or any other fund right now. If you do stick it in one fund, you're going to need some guts in order to watch the value drop by thousands during some periods along the way. Two comments: 1) buy it and forget it (so you really aren't worried about it). You only care what the value is 10 years down the road. 2) Having the guts to ride it out is pretty much true of any investment these days. Precious metals: never been a big fan; they have their place, but not as a core holding. Bonds: interest rates are essentially zero = now is not the time to buy bonds. Real estate: yea, but it's probably too early to really go into the market and it's probably beyond the scope of what a parent is going to buy for a child. Cash = <0 return. The stock market is really the only viable investment vehicle IMO...and hey, stocks look cheap these days! If my dad were going to put $50k away for 10 years for me, I'd bet on the S&P. You could go with a broader index, but you are starting to include companies with higher risk and further away from the "core" of America. If you can't bet on the 500 largest companies in America, what is left to bet on? OK, there's China and India, who I'm really betting on, but you know what I mean. Granted, we are in for some "interesting" financial times ahead, but I truly believe that a majority of Americans are done with the "hope and change" experiment and things are going to be going in the right direction in the near future. I think a conservative strategy is useful right now, especially with a 10 year window. I'm biased by looking to retire in less than 10 years, but looking back on the last 12 and the current state of affairs, I wouldn't want anyone to get real cavalier unless they're looking out to 20 to 30 years. Most definitely on the conservative approach...really the point I was trying to make. "Risk" is an individual thing and in reality, risk is very nearly a function of one thing (as you state): time (investment horizon). Now I consider the S&P relatively risk free and with that said, if I were just starting out, or just starting someone else out, building a base or core for the portfolio is the primary concern. Build the base until you are satisfied with it, then branch out into riskier/more exotic investment vehicles. |