Where to invest $2200 in a 16 year old's Roth IRA

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waterchange
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Where to invest $2200 in a 16 year old's Roth IRA

Post by waterchange » Wed Apr 11, 2018 11:03 am

My 16 year old earned income last year and I opened a minor's Roth IRA for him, funding it with the $2229 amount that he earned. This is with Fidelity since my employer's account is with them. My question is what fund should I invest this in? Any of the Vanguard funds I try (targeted retirement accounts, Star Fund VGSTX, etc.) all seem to have $2500 or higher minimums. Suggestions?

N10sive
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by N10sive » Wed Apr 11, 2018 11:31 am

Why not just invest it in a fidelity target date fund?

invst65
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by invst65 » Wed Apr 11, 2018 11:36 am

I would transfer the whole account to Vanguard. That's what I did when Fidelity wanted a $75 fee to buy a Vanguard Fund.

This was actually very easy to do. I just opened up the account at Vanguard and they took care of everything. I didn't even need to talk to a human being.

Glockenspiel
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by Glockenspiel » Wed Apr 11, 2018 11:43 am

I would move the entire account to Vanguard and then invest it in a Vanguard Retirement 2065 fund or maybe the STAR fund, as those funds only have a $1,000 minimum if it's a Vanguard account. It's easy to do.

mortfree
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by mortfree » Wed Apr 11, 2018 11:45 am

ITOT... fidelity's version of vanguards Total US (VTI, VTSAX)....


check back in 40 years or so.

rebellovw
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by rebellovw » Wed Apr 11, 2018 11:46 am

No need to move to VG - that is silly.

I'd just do Total Stock Market and leave it. iShares ITOT or FSTVX (find the none admiral version)

stuper1
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by stuper1 » Wed Apr 11, 2018 11:46 am

How about the iShares ETFs that trade commission free at Fidelity, such as ITOT, the total US stock market ETF? Do those have a minimum amount?

Tal-
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by Tal- » Wed Apr 11, 2018 11:46 am

Props for having a bright teenager!

At age 16, the learning is more important than the investments or returns. So, even if a target date fund was viable, I'm not sure that I would advocate that.

I would have him put together a 3-fund portfolio with ETF's - though I would model this after a target date fund's target allocation. You can easily do this in Fidelity, without any transaction fees. And, it teaches him to do some basic actions like setting up a target portfolio, reviewing costs, reviewing index funds, understanding what an ETF is, and making a purchase. Long term, these will be more valuable than the $2300.

Note that I would not move him to another firm. Although it's easy to do, I think that the first step being to change firms sends some wrong messages (focusing on firm rather than the investments, knocking one of the few decisions made as wrong, delaying investing, a few added steps, etc.).
Debt is to personal finance as a knife is to cooking.

daveydoo
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by daveydoo » Wed Apr 11, 2018 11:48 am

DS did same thing with similar balance -- I think we did Vanguard ETFs through a Vanguard brokerage account. There was no annual account fee but it may have been "linked" to our account balance to achieve that. His login is independent and I can not see or manage his account, but he was somehow "credited" for our aggregate balance. I think it's the only time I've ever asked for individual-level help from their email customer service.
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bloom2708
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by bloom2708 » Wed Apr 11, 2018 11:50 am

I went with VT (Vanguard Total World) in our 18 year old's Roth for 2017.

I matched her contribution. If I'm still here in 30 years, I'll see where the balance is.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

rebellovw
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by rebellovw » Wed Apr 11, 2018 11:52 am

Don't forget to set auto-reinvest dividends

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oldcomputerguy
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by oldcomputerguy » Wed Apr 11, 2018 12:00 pm

Do not try to buy Vanguard mutual funds at Fidelity. If you want Vanguard mutual funds specifically, open a Roth account at Vanguard.

That being said, Fidelity has quite a few suitable options in their low-cost fund lineup, many of which are commission-free. Given that you don't have the $2500 minimum investment required by most Fidelity mutual funds, I'd suggest you dump it all into ITOT. Revisit later after he has more dollars contributed.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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ajw360
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by ajw360 » Wed Apr 11, 2018 12:27 pm

I agree with Tal. I like the idea of helping him set up a 3 fund portfolio from Fidelity's list of commission free ETF's. Something like this:

48% ITOT
32% IXUS
20% IUSB

That would give him an 80/20 stock/bond asset allocation with 40% international equity exposure.

rebellovw
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by rebellovw » Wed Apr 11, 2018 12:31 pm

Why does a 16 year old need bonds?

I'd consider this fun money and be 100% TSM and be done with it. No need for 80/20.

Tal-
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by Tal- » Wed Apr 11, 2018 12:45 pm

rebellovw wrote:
Wed Apr 11, 2018 12:31 pm
Why does a 16 year old need bonds?

I'd consider this fun money and be 100% TSM and be done with it. No need for 80/20.
I think there are two reasons:

First, using bonds is a best practice, and learning the general best practice is often a good starting point. And two, investing in bonds today let's him learn about bonds, and how they compare/contrast to stocks.

If, as a well informed 20-something investor, he wants to go 100% stock, he has nothing but my blessing. But, when just starting off, I think bonds provide some value.
Debt is to personal finance as a knife is to cooking.

Spirit Rider
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by Spirit Rider » Wed Apr 11, 2018 5:04 pm

Keep it simple.

If your son made $2229 last year. Surely he has/will made/make an additional $2500 - $2229 = $271 this year.

Make a 2018 Roth IRA contribution of $271 and buy $2500 of FFNOX Fidelity Four-In-One Index Fund.

mnnice
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by mnnice » Wed Apr 11, 2018 9:50 pm

We did something similar the past two years. Fidelity is the custodian. DS picked the investment and he chose Nvidia. Not sure if this is good or bad. The good news is that his Roth balance exceeds his lifetime w-2 earnings. The bad news is he could think he is a great stock picker.

waterchange
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Re: Where to invest $2200 in a 16 year old's Roth IRA

Post by waterchange » Thu Apr 12, 2018 6:36 pm

Thanks for all of the replies. I'm a pretty naive investor as I've only paid attention to Vanguard funds. The pointers to Fidelity's ETFs like ITOT are extremely helpful and is exactly what I'm looking for.

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