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Best funds for new teen investor

2,020 Views | 17 Replies | Last: 6 yr ago by ac04
tamc91
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9:57a, 3/13/18
AG
My son (14) wants to start investing. He's a good saver but still at <$500. He wants to start with an index fund and the move to a few individual stocks.

Most of my investing is tied to retirement accounts or a 529, so I haven't been much help. Some of the research I've done have a higher minimum than he can afford. I thought I'd check here and see if others have experience with investment vehicles with a low starting minimum, low fees, and the option for both funds and future trading in the same account.
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IrishTxAggie
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10:36a, 3/13/18
AG
Look at an app called Stash. Might be a good start for him.
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HECUBUS
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10:45a, 3/13/18
AG
Our now 16 year old just got out of FNCMX with a $550 profit on a $2500 investment last summer. He will get back in after a big correction. We were hoping he would stay long term. He sees us cashing out for different reasons and it's probably a good move. I don't think I've ever seen tech so overbought.
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oldarmy1
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1:08p, 3/13/18
AG
Most important thing is he do it. I established the habits with my kids at an early age. They did their chores, school work, and social involvement (church, sports, etc) and they received an allowance. 20% of that allowance went into a market fund account. 20% went to short term savings. 10% went to church and the 50% was theres to spend however they wanted.

Having debt free children is one of the greatest gifts you can give. Both mine were by 24 and my 27 year old is building a beautiful custom home after becoming interested in trading as well as investing, and doing so very well.

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Rice and Fries
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In reply to HECUBUS • 1:15p, 3/13/18
HECUBUS said:
Our now 16 year old just got out of FNCMX with a $550 profit on a $2500 investment last summer. He will get back in after a big correction. We were hoping he would stay long term. He sees us cashing out for different reasons and it's probably a good move. I don't think I've ever seen tech so overbought.
Then you weren't investing in the early 2000s. http://www.multpl.com/shiller-pe/

That shows how high the Shiller PE Ratio was in the dot.com era.

Tech may be overvalued or it may not be, but it could be a lot worse.

My advice to the OP...have your kid's read Common Sense Investing and the Intelligent Investor.

Teach them to invest in companies for the long term. "Timing the market" is 98% unsuccessful (when trying to get in on the bottom). Time in Market > Timing the market.

Dollar cost averaging over the long term and buying into a broad based S&P500 index fund will put you ahead of most professionals. If you don't believe me, look up Warren Buffet's bet with a hedge fund manager.

http://www.businessinsider.com/warren-buffett-wins-million-dollar-bet-against-hedge-funds-2018-1


Basically, it all comes down to this...Explain to your kid that achieving 7% annual returns (9% including inflation) over the entire life of the portfolio means they did incredibly well. There will always be some yahoo who thinks they can consistently earn more then 10% yearly for a prolonged period, but history is against them.

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94chem
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1:23p, 3/13/18
Because of the longer horizon, many people assume that younger investors should be more aggressive. This is actually sort of incorrect. Young investors should be conservative, until they have both the income and the nest egg to support a more aggressive approach. I would recommend a balanced fund, maybe 60/40 stocks and bonds, and if he must dabble in individual stocks, find historic companies with good dividend yields.
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IrishTxAggie
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In reply to 94chem • 1:26p, 3/13/18
AG
60/40 seems a bit too conservative IMO.
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jh0400
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1:26p, 3/13/18
AG
Why not look into one of the fractional share platforms like Stockpile or Folio?
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leoj
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1:26p, 3/13/18
AG
Intelligent investor is a must read.
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Ragoo
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In reply to leoj • 1:36p, 3/13/18
AG
leoj said:
Intelligent investor is a must read.
for a teen? no.
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leoj
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1:37p, 3/13/18
AG
Lol good point sorry, overlooked that he's 14.
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aggie028
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1:49p, 3/13/18
He could buy VB and let it ride.
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IrishTxAggie
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1:52p, 3/13/18
AG
AVEO and wait for the riches!!
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HECUBUS
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In reply to Rice and Fries • 3:37p, 3/13/18
AG
Cashed out when CDs hit 6%, I missed that. Started getting back in to tech after '08.
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94chem
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In reply to IrishTxAggie • 6:22p, 3/13/18
IrishTxAggie said:
60/40 seems a bit too conservative IMO.


Maybe, but with $500, you get rich by earning money, not by investing it. I think you need to emulate Benjamin Franklin before you go after Warren Buffet.
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IrishTxAggie
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In reply to 94chem • 6:25p, 3/13/18
AG
I guess, but it could be a good learning experience too for a risk/reward scenario. At 14, if the kid takes a hit on a bad stock, it won't destroy him. And if he makes a good call and gets a good one, you can see how he handles the "win" and he can evaluate a hold it or take your profits scenario.
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jczar03
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9:37a, 3/14/18
AG
I'm in my 50's. If I had a chance to do it all over again, I'd keep it simple and invest in an S&P 500 index fund. You are invested in the market that has historically provided a solid return over the long-term at a very low cost.

If you do not know how to research and evaluate a company, or you are not willing to commit the time necessary to watch the stock, I'd recommend not investing in individual stocks. You may get lucky every once in a while with a pick, but you may also lose 50% or more in some investments.
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SA Ag 91
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5:21p, 3/14/18
AG
How about if you become a "partner" with him and each of you are 50-50 partners in the fund.

I would suggest an index fund at Vanguard and the minimum is I think $1,000.
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ac04
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8:48p, 3/14/18
make them get a job, then 100% match anything they choose to put in the market instead of spending. have him buy stock in companies he likes or buy market index.
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