Best investment for our two year old son

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Conadfaal
Posts: 2
Joined: Wed Jul 10, 2013 3:28 pm

Best investment for our two year old son

Post by Conadfaal » Wed Jul 10, 2013 3:42 pm

We just closed out a $30,000 CD for our two year old son and would like to put it somewhere that will grow until he's a teenager. I don't want to do a 529 because you never know if someone will go to college. Any other ideas for a 15+ year high reward investment?

WHL
Posts: 789
Joined: Mon Dec 10, 2012 2:22 pm

Re: Best investment for our two year old son

Post by WHL » Wed Jul 10, 2013 4:20 pm

I have no idea of the tax implications, but how about buying EE or I savings bonds?

Jim180
Posts: 318
Joined: Wed Jun 26, 2013 9:47 pm

Re: Best investment for our two year old son

Post by Jim180 » Wed Jul 10, 2013 4:22 pm

With that kind of timeframe I think you could put it in the Total Stock Market Index.

TRC
Posts: 1818
Joined: Sat Dec 20, 2008 5:38 pm

Re: Best investment for our two year old son

Post by TRC » Wed Jul 10, 2013 4:48 pm

For my 3 & 6 year olds, we have investment accounts (not for college) at Vanguard with the Vanguard Target Retirement 2060 Fund.

It's comprised of the following funds and has an expense ratio of .18%

- Vanguard Total Stock Market Index Fund Investor Shares 63.2%
- Vanguard Total International Stock Index Fund Investor Shares 26.7%
- Vanguard Total Bond Market II Index Fund Investor Shares† 8.1%
- Vanguard Total International Bond Index Fund Investors Shares 2.0%

https://personal.vanguard.com/us/funds/ ... =INT#tab=3

staythecourse
Posts: 4964
Joined: Mon Jan 03, 2011 9:40 am

Re: Best investment for our two year old son

Post by staythecourse » Wed Jul 10, 2013 4:52 pm

WHL wrote:I have no idea of the tax implications, but how about buying EE or I savings bonds?


If you have a 10+ yr. time horizon for needing the money there is no good reason to suggest i bonds over equities, especially after the OP already said he/ she might not use it for educational purposes. This is a perfect example of recency bias at work.

Could I- bonds to better then equities? Sure. But are you investing on PROBABILTIES or POSSIBILITIES? The probability is low otherwise NO ONE would invest in equities and take on volatility on the downside they didn't have a great probability of outperforming.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

WHL
Posts: 789
Joined: Mon Dec 10, 2012 2:22 pm

Re: Best investment for our two year old son

Post by WHL » Wed Jul 10, 2013 5:39 pm

staythecourse wrote:
WHL wrote:I have no idea of the tax implications, but how about buying EE or I savings bonds?


If you have a 10+ yr. time horizon for needing the money there is no good reason to suggest i bonds over equities, especially after the OP already said he/ she might not use it for educational purposes. This is a perfect example of recency bias at work.

Could I- bonds to better then equities? Sure. But are you investing on PROBABILTIES or POSSIBILITIES? The probability is low otherwise NO ONE would invest in equities and take on volatility on the downside they didn't have a great probability of outperforming.

Good luck.


If I had a lump of money that I would want to guarantee my kids received in ~16 years, I wouldn't put it into equities. EE bonds would be my choice. Has nothing to do with "recency bias" as you mentioned.

User avatar
Kalo
Posts: 425
Joined: Sat May 25, 2013 1:01 pm

Re: Best investment for our two year old son

Post by Kalo » Wed Jul 10, 2013 6:11 pm

The OP did say high reward.

The previous poster that mentioned Target Retirement Date fund presents a possible method. These can be used for any date (doesn't have to be retirement date). So you could pick one of those that would correspond to a retirement date of roughly 15 years from now (or 20 or 25 if you want more risk and less tapering toward bonds at the "maturity" date).

Kalo
"When people say they have a high risk tolerance, what they really mean is that they are willing to make a lot of money." -- Ben Stein/Phil DeMuth - The Little Book of Bullet Proof Investing.

YttriumNitrate
Posts: 1062
Joined: Tue Mar 26, 2013 12:13 pm

Re: Best investment for our two year old son

Post by YttriumNitrate » Wed Jul 10, 2013 6:13 pm

deleted.
Last edited by YttriumNitrate on Sat Mar 12, 2016 12:34 pm, edited 1 time in total.

User avatar
Rainier
Posts: 1253
Joined: Thu Jun 14, 2012 5:59 am

Re: Best investment for our two year old son

Post by Rainier » Wed Jul 10, 2013 6:14 pm

In 16 years your EE bonds will be worth almost the same as today...you need another four years.
- Bill

User avatar
parsi1
Posts: 239
Joined: Tue May 29, 2012 8:03 am

Re: Best investment for our two year old son

Post by parsi1 » Wed Jul 10, 2013 6:22 pm

My kids are 7 and 11 and I have their fund invested in Vanguard Wellington. It is a managed fund with annual fee less than many ETFs.

rallycobra
Posts: 179
Joined: Sat Aug 23, 2008 9:40 pm

Re: Best investment for our two year old son

Post by rallycobra » Wed Jul 10, 2013 7:40 pm

250k 10 pay whole life policy with Guardian with a GIO (guaranteed insurability option).

I'm not a life insurance guy and only buy term for myself, but I know medicine. You never know what will happen and if the child gets a diagnosis they might not be able to purchase life insurance in the future.

It will take about 11 years before you break even. What is a 10 yr CD, 2.5%? I would take the insurance and get the GIO.
26% Total Stock Market/20% Total International/13% Small Cap Value/6% Reit/35% Intermediate Bond Fund | 65/35 Stock Bond 2:1 Domestic/International + Reit

User avatar
joe8d
Posts: 4240
Joined: Tue Feb 20, 2007 8:27 pm
Location: Buffalo,NY

Re: Best investment for our two year old son

Post by joe8d » Wed Jul 10, 2013 7:43 pm

Jim180 wrote:With that kind of timeframe I think you could put it in the Total Stock Market Index.


2nd that. BTW, Bob Brinker uses TSM to invest for his grandkids.
All the Best, | Joe

mickens16
Posts: 317
Joined: Wed Apr 06, 2011 8:52 am

Re: Best investment for our two year old son

Post by mickens16 » Wed Jul 10, 2013 8:01 pm

For my 6 and 2 year olds. I personally use VT and Intermediate Term Tax Exempt at 70% stock 30% bond split.

Grt2bOutdoors
Posts: 17138
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Best investment for our two year old son

Post by Grt2bOutdoors » Wed Jul 10, 2013 9:59 pm

joe8d wrote:
Jim180 wrote:With that kind of timeframe I think you could put it in the Total Stock Market Index.


2nd that. BTW, Bob Brinker uses TSM to invest for his grandkids.


+1 I use TSM for my kid.

But if you want to hedge your bet - 25K in VTSAX, 5K in EE bonds. In 30 years, one of three things are going to happen - VTSAX soars over the next 30 years, VTSAX takes off and soars until year 25, then takes a dive at year 30, in all scenarios (assuming the economy is in it's present form), the EE bond is worth in nominal terms 10,201.08. Think of the EE bond as your consolation prize or gravy on top of the equities.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

User avatar
graveday
Posts: 509
Joined: Sun Oct 05, 2008 2:03 am
Location: Upstate Calif. near Sacramento

Re: Best investment for our two year old son

Post by graveday » Wed Jul 10, 2013 11:18 pm

In best stay the course form, I suggest you keep the marriage together. I know this might seem like a given, but I wanted to make it a touchstone.

letsgobobby
Posts: 10614
Joined: Fri Sep 18, 2009 1:10 am

Re: Best investment for our two year old son

Post by letsgobobby » Wed Jul 10, 2013 11:48 pm

TRC wrote:For my 3 & 6 year olds, we have investment accounts (not for college) at Vanguard with the Vanguard Target Retirement 2060 Fund.

It's comprised of the following funds and has an expense ratio of .18%

- Vanguard Total Stock Market Index Fund Investor Shares 63.2%
- Vanguard Total International Stock Index Fund Investor Shares 26.7%
- Vanguard Total Bond Market II Index Fund Investor Shares† 8.1%
- Vanguard Total International Bond Index Fund Investors Shares 2.0%

https://personal.vanguard.com/us/funds/ ... =INT#tab=3

Are you me? This is exactly what we do for our 3 and 6 year old kids, also with their non-college money.

I absolutely approve of your strategy. :thumbsup

whitecliff
Posts: 64
Joined: Sun Jun 02, 2013 6:30 pm

Re: Best investment for our two year old son

Post by whitecliff » Mon Jun 08, 2015 1:21 pm

I know this is an old thread but maybe somebody will reply. In what vehicle are you investing in the target retirement fund? Is this is a traditional IRA? I am looking to do the same for my one year old for his retirement. Put a couple hundred in every now and then and let it cook for 65 years, could be substantial money for him with minimal investment by me.



letsgobobby wrote:
TRC wrote:For my 3 & 6 year olds, we have investment accounts (not for college) at Vanguard with the Vanguard Target Retirement 2060 Fund.

It's comprised of the following funds and has an expense ratio of .18%

- Vanguard Total Stock Market Index Fund Investor Shares 63.2%
- Vanguard Total International Stock Index Fund Investor Shares 26.7%
- Vanguard Total Bond Market II Index Fund Investor Shares† 8.1%
- Vanguard Total International Bond Index Fund Investors Shares 2.0%

https://personal.vanguard.com/us/funds/ ... =INT#tab=3

Are you me? This is exactly what we do for our 3 and 6 year old kids, also with their non-college money.

I absolutely approve of your strategy. :thumbsup

Grt2bOutdoors
Posts: 17138
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Best investment for our two year old son

Post by Grt2bOutdoors » Mon Jun 08, 2015 1:35 pm

whitecliff wrote:I know this is an old thread but maybe somebody will reply. In what vehicle are you investing in the target retirement fund? Is this is a traditional IRA? I am looking to do the same for my one year old for his retirement. Put a couple hundred in every now and then and let it cook for 65 years, could be substantial money for him with minimal investment by me.



letsgobobby wrote:
TRC wrote:For my 3 & 6 year olds, we have investment accounts (not for college) at Vanguard with the Vanguard Target Retirement 2060 Fund.

It's comprised of the following funds and has an expense ratio of .18%

- Vanguard Total Stock Market Index Fund Investor Shares 63.2%
- Vanguard Total International Stock Index Fund Investor Shares 26.7%
- Vanguard Total Bond Market II Index Fund Investor Shares† 8.1%
- Vanguard Total International Bond Index Fund Investors Shares 2.0%

https://personal.vanguard.com/us/funds/ ... =INT#tab=3

Are you me? This is exactly what we do for our 3 and 6 year old kids, also with their non-college money.

I absolutely approve of your strategy. :thumbsup


Only one who has earned income can open an IRA. Therefore, if your one year old is not currently earning income, the next bet would be to open a UTMA and place the monies in a fund similar to a Lifestrategy Growth fund - earnings under $2,100 this year are tax-exempt. If you filed a tax return for your child until age of majority, you could save a decent nickel. The downside however is, funds are considered fair game for creditors, applying for college financial aid and of course, junior could always decide to spend the money on a trip to Cancun instead of leaving it where it is.....read http://www.fairmark.com for more details of the pros and cons of an UTMA.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Post Reply