Investing for a 17 y.o.

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powersmo
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Investing for a 17 y.o.

Post by powersmo »

My soon to be 17 y.o. son would like to find a good way to invest for the future with the $8,000 he has saved. Right now it is sitting in a saving account at our credit union makeing about .25%. We would appreciate your views and suggestions on which mutual funds that we/ he should consider. He is likely to go away for college so being able to use this investment manner to help reinforce what his mother and I have taught him over the years will be very helpful in completing what we can to help him prepare for adulthood. At this time, I am probably going to suggest a small cap value, TSM and maybe Health Care. I know that Health Care is a sector play, but as things go the future of health care is bright to say the least in my opinion and worth a small percentage of funds. Thanks for you feedback.
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Pajamas
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Re: Investing for a 17 y.o.

Post by Pajamas »

I would suggest holding some funds in a savings account or similar in case he needs to spend it on something (computer, vacation, etc.) and then invest in 90% Vanguard Total Stock Market and 10% Vanguard Total Bond Market. You can help him rebalance a couple of times a year. If he has earned income, Roth IRA.

Why? It's more important to keep it simple and make sure he learns the basic principles rather than try to get tricky. He's 17 years old and has better things to do and think about until he graduates college. If he were very interested in investing, you wouldn't be having to encourage him to move money out of a basic savings account and figure out what to put it in. If you can teach him basic investing principles at his age, that will be doing good.

Give him a hard copy of "If You Can" or an electronic copy if you think that is more appropriate:

https://www.etf.com/docs/IfYouCan.pdf
MotoTrojan
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Re: Investing for a 17 y.o.

Post by MotoTrojan »

Leave the small cap and sector plays for when they have a grasp on the basics. That is setting them up for failure. Simplicity is key. TSM is a good option. Could also add Total Int to teach rebalancing (I personally think 17 is too young for bonds, I hold none at 26).

Make sure they understand how a Roth works and contribute when able to there first.

A target retirement fund may be a good option too.
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Nate79
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Re: Investing for a 17 y.o.

Post by Nate79 »

Savings account, short term treasuries, CD's. Unless his financial future is completely paid up for the next 5 years (including the first year out of college) I would not invest this money. There are so many expenses they may need over the next few years and the risk of stocks is too great.

A few obvious expenses: car, moving expenses for first job, first months rent/deposit for their first place after college, etc.
jpsc
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Re: Investing for a 17 y.o.

Post by jpsc »

Put your son $8K in I-bonds. When he is ready, he can take the money out and use it to pay for college tax free.
I-bonds is currently paying 2.58%, tax deferred
and nothing beat I-bonds (CD, saving ...even stock index funds) at the moment.
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arcticpineapplecorp.
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Re: Investing for a 17 y.o.

Post by arcticpineapplecorp. »

powersmo wrote: Thu Apr 26, 2018 3:54 pm My soon to be 17 y.o. son would like to find a good way to invest for the future with the $8,000 he has saved. Right now it is sitting in a saving account at our credit union makeing about .25%. We would appreciate your views and suggestions on which mutual funds that we/ he should consider. He is likely to go away for college so being able to use this investment manner to help reinforce what his mother and I have taught him over the years will be very helpful in completing what we can to help him prepare for adulthood. At this time, I am probably going to suggest a small cap value, TSM and maybe Health Care. I know that Health Care is a sector play, but as things go the future of health care is bright to say the least in my opinion and worth a small percentage of funds. Thanks for you feedback.
Perhaps you're not getting many suggestions for actual investments because of this part in red. Do you mean to say he plans to use the money he's saved in the next few years (in college)? If so, you can't invest it because investments are for the long term (think retirement), not the short term. If he can commit to leaving these funds alone until he gets to retirement, you'll get some ideas about mutual funds (index only) to invest in. But otherwise, money you might need in the short term (within the next 10 years) you really can't afford to take risk with. What if you invest it, the value drops and doesn't recover by the time you need the money? Then what? The time horizon tells you (in part) whether you can take any risk (and how much).

Short term--no risk, no reward
Long term -- more risk, more reward
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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abuss368
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Re: Investing for a 17 y.o.

Post by abuss368 »

Buy him an investing book such as Jack Bogle's "Little Book of Common Sense Investing", The Bogleheads Guides, or Jack Brennan "Plan Talk on Investing". Open a simple bank account and perhaps a Roth IRA with a Target fund or Two Fund Portfolio of Total Stock and Total Bond.
John C. Bogle: “Simplicity is the master key to financial success."
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abuss368
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Re: Investing for a 17 y.o.

Post by abuss368 »

powersmo wrote: Thu Apr 26, 2018 3:54 pm My soon to be 17 y.o. son would like to find a good way to invest for the future with the $8,000 he has saved. Right now it is sitting in a saving account at our credit union makeing about .25%. We would appreciate your views and suggestions on which mutual funds that we/ he should consider. He is likely to go away for college so being able to use this investment manner to help reinforce what his mother and I have taught him over the years will be very helpful in completing what we can to help him prepare for adulthood. At this time, I am probably going to suggest a small cap value, TSM and maybe Health Care. I know that Health Care is a sector play, but as things go the future of health care is bright to say the least in my opinion and worth a small percentage of funds. Thanks for you feedback.
Jack Bogle has said that "most investors could probably go an entire lifetime without a sector fund and not need it".

Keep investing simple!
John C. Bogle: “Simplicity is the master key to financial success."
billfromct
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Re: Investing for a 17 y.o.

Post by billfromct »

In would suggest putting the $8,000 in a Vanguard Prime Money Market fund which is now paying 1.81%. Then you can figure out how to deploy that money.

If he has any earned income, he can open a Roth IRA for as little as $1,000 in a Vanguard Target Retirement 2065 Fund. Of course he could put as much $5,500 into a Roth IRA if he has the earned income.

He would have 45-50 years for a Roth IRA to compound before he may need it after age 59.5.

bill
Exafchick
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Re: Investing for a 17 y.o.

Post by Exafchick »

I'm trying to get my almost 19 year old nephew thinking about saving/investing. He wants a Dodge Demon and to start a woodworking business but doesn't have the foresight to plan for them. I'm going to give him a couple of the books recommended on this site and hopefully that will motivate him. I wish I had known that opening a Roth when I first began working would amount to over a million dollars by the time i was 60! Most teens don't/can't think about 40-50 years down the road so kudos to you and your wife for instilling that in him!
Teague
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Re: Investing for a 17 y.o.

Post by Teague »

Exafchick wrote: Fri Apr 27, 2018 9:30 am I'm trying to get my almost 19 year old nephew thinking about saving/investing. He wants a Dodge Demon ...
I'd be really curious what insurance would cost for this 19 year old driving this (barely) street-legal drag car.
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Exafchick
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Re: Investing for a 17 y.o.

Post by Exafchick »

Teague wrote: Fri Apr 27, 2018 9:58 am
Exafchick wrote: Fri Apr 27, 2018 9:30 am I'm trying to get my almost 19 year old nephew thinking about saving/investing. He wants a Dodge Demon ...
I'd be really curious what insurance would cost for this 19 year old driving this (barely) street-legal drag car.
Me too! Definitely don't think he's considered anything else except that it looks cool!
billfromct
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Re: Investing for a 17 y.o.

Post by billfromct »

According to "the Google", a Dodge Demon MSRP is between $80k-$85k.

Good luck.

bill
Marketman
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Re: Investing for a 17 y.o.

Post by Marketman »

I also can't tell from the OP if he will need the money in college or for any other reason soon. If so, short-term investments only (no stocks) would be appropriate. If he can commit to investing this money for retirement, I would use a 3 fund portfolio of total US stock, total international stock and total US bond. I think Vanguard has a 3K minimum investment (???) for these funds so he might need a thousand dollars more. If he had 9K he could do 1/3 in each and learn from these investments over time. He also could start with 3K in the two stock funds and do the bond fund later when he had another thousand dollars. I would view this as more of a learning investment by having all three funds to watch and rebalance than an optimal asset allocation for his age.
Grt2bOutdoors
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Re: Investing for a 17 y.o.

Post by Grt2bOutdoors »

Vanguard Lifestrategy Growth - set it and forget it.
When he gets out of school in exactly 5 years, it should be worth more than $8K.
The fund holds all securities needed for a low-cost diversified investment and he will not need to tinker with it.
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PFInterest
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Re: Investing for a 17 y.o.

Post by PFInterest »

powersmo wrote: Thu Apr 26, 2018 3:54 pm My soon to be 17 y.o. son would like to find a good way to invest for the future with the $8,000 he has saved. Right now it is sitting in a saving account at our credit union makeing about .25%. We would appreciate your views and suggestions on which mutual funds that we/ he should consider. He is likely to go away for college so being able to use this investment manner to help reinforce what his mother and I have taught him over the years will be very helpful in completing what we can to help him prepare for adulthood. At this time, I am probably going to suggest a small cap value, TSM and maybe Health Care. I know that Health Care is a sector play, but as things go the future of health care is bright to say the least in my opinion and worth a small percentage of funds. Thanks for you feedback.
VTSAX or VTI. Also spend some.
Hukedonfonix4me
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Re: Investing for a 17 y.o.

Post by Hukedonfonix4me »

MotoTrojan wrote: Thu Apr 26, 2018 4:51 pm Leave the small cap and sector plays for when they have a grasp on the basics. That is setting them up for failure. Simplicity is key. TSM is a good option. Could also add Total Int to teach rebalancing (I personally think 17 is too young for bonds, I hold none at 26).

Make sure they understand how a Roth works and contribute when able to there first.
+1
"While some mutual fund founders chose to make billions, he chose to make a difference." | -The Bogleheads' Guide to Investing
Topic Author
powersmo
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Re: Investing for a 17 y.o.

Post by powersmo »

Thanks for all the replys. My son won't be spending this money for college. His college is already taken care of regardless of where he choses to go. He is an Eagle Scout since age 13, and was this inducted into the Science National Honors Society as well as the National Society. His current plans are to attend West Point if his application is approved which seems to have a better than average change based on recent conversations with Admissions. As for a car, I gave him my 2012 Honda Accord sedan which he was after me to take over driving ever since he got his driving permit. He does have a summer job as a lifeguard so that will take care of a good deal of his basic spending until his graduates high school. So really the money he has in the bank now is a starting point for when he graduates college as starts adulthood.
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arcticpineapplecorp.
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Re: Investing for a 17 y.o.

Post by arcticpineapplecorp. »

powersmo wrote: Sat Apr 28, 2018 11:05 am His current plans are to attend West Point if his application is approved which seems to have a better than average change based on recent conversations with Admissions.
I'm sure they let you know he needs a recommendation (congressional or service connected):
After determining that you meet the basic requirements to become a cadet, you should begin seeking nominations. In order to be considered for admission at West Point, you need to be nominated. There are two types of nominations, the Congressional Nomination and the Service-Connected Nomination.

source: https://www.usma.edu/admissions/sitepag ... tions.aspx
powersmo wrote: Sat Apr 28, 2018 11:05 am He does have a summer job as a lifeguard so that will take care of a good deal of his basic spending until his graduates high school. So really the money he has in the bank now is a starting point for when he graduates college as starts adulthood.
If the money is to be used when he graduates college and "starts adulthood" then I don't see how it can be invested. It's not a long enough timeframe. You will have to keep the money safe or either keep it in CDs or short term bond index or something similar that won't earn much.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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