My wife and I want to start a mutual fund account for our grandson. He is currently 5 years old and we want to start with 2,000 and have money put in his account
automatically every payday.
What type fund should we be looking for? A target date fund?
We didnt want to do the college fund because he may not want
to go to college. He may decide to go in the military or get a trade.
Goal is to have the money for him if he does decide to go to college or
if not to help him purchase a home in the future.
Please let me know your opinions.
Thanks
Hard to go wrong with a basic index fund with Fidelity or Vanguard. At some point later, if it makes sense, it could be converted to an IRA if he isn't going to need it shorter term
Vanguard is one of the best and with one of the lowest fees. Also, make sure you are getting the best return and not paying taxes on the gains. Colorado has a 529 college fund through Vanguard where you money grows tax free as long as it is used for college related expenses. If your child doesn’t go to college you just pay the taxes on the gains. Maybe your state has something similar.
If the child is young I would go with higher risk US stock funds.
Hard to go wrong with a basic index fund with Fidelity or Vanguard.
This. I understand that there are more mutual funds in existence than listed stocks. Most of them under perform the indexes over time.
Vanguard made December 2018 bearable.
I really like Vanguard funds but one of my favorites is the Fidelity Four In One Fund. It is a fund of funds, which makes it slightly more diversified. It is composed of their S&P500 Index-48%, Extended Market Index-12%, US Bond Index-15% and International Index-25%. If you only want one fund, this is it. I'm not sure if Vanguard has something similar. Fees are only .13%.
Put it in a trust fund that he can use only for tuition or else he waits until he is 55 to get it. Otherwise he might go on a spending binge. Knowing you have an inheritance coming can ruin a kid. And a few thousand can seem like an inexhaustible fortune to a kid.
Putnam or Vanguard index fund. Low yearly fees is important..
Put it in a trust fund that he can use only for tuition or else he waits until he is 55 to get it. Otherwise he might go on a spending binge. Knowing you have an inheritance coming can ruin a kid. And a few thousand can seem like an inexhaustible fortune to a kid.
+1. I don't know if I'd make it 55, but 30 or 35 would work. In fact, I wouldn't even tell him that you have an account for him as long as possible.
Put it in a trust fund that he can use only for tuition or else he waits until he is 55 to get it. Otherwise he might go on a spending binge. Knowing you have an inheritance coming can ruin a kid. And a few thousand can seem like an inexhaustible fortune to a kid.
+1. I don't know if I'd make it 55, but 30 or 35 would work. In fact, I wouldn't even tell him that you have an account for him as long as possible.
Only you can decide what the right age is, but I would NOT tell the kid anything until he's in college or 21. He shouldn't even know the account exists...