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New Roth for 16 y/o daughter

To start off, I am comfortable managing my own (and my family's) portfolios, and have experience in OEFs/CEFs, stocks, bonds, options, etc. I am mostly a dividend/dividend growth/income investor (especially with my parents' portfolios), but sometimes have a hard time being a "pure growth/total return" investor. LOL.

 

My daughter got her first job this summer, and I told her I would put the money she gets paid into a Roth IRA (I know I should have her contribute also, but she's a good kid and has a pretty good idea--as much as a 16 year old can--of the value of money). So it will probably be less than $1K total this year. And it's at Fidelity. I am tempted to put every thing into FSPTX and call it good, but my thought was a 50/50 QQQ/SCHD vs VIG portfolio (Fido allows dollar buys into certain stocks and ETFs). Or just throw it into a tech ETF or OEF or VUG?

 

In the grand scheme of things it probably doesn't matter to her long term wealth (she has wealthy grandparents who have set up a trust for her, provided she completes her education and makes good life decisions). But it will also be an exercise in her participating in investing.

 

Thoughts?

 

Thanks in advance

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Frequent Contributor

Re: New Roth for 16 y/o daughter

Hi Graust...

I started Trad IRAs for each of my three daughters at their age 12...did not have Roth's then.  Now in their late forties, these IRAs are clearly enabling early retirement...oldest daughter now financially independent. 

Note folks, you must have 'earned income" for kids to do this.  It may be income earned doing chores, etc for you.  File a tax return for them each year if using a Trad IRA.

Re your Roth, Graust:

--Suggest 100% stock fund allocation...until $150,000 reached.

--Recommend tilt to growth assets...even though great run to date in high tech.  BTW FSPTX is my largest fund holding currently.  Consider MGK, Vang'd Mega Cap Fund.

--Suggest some international stock fund...and perhaps an Emerging Market or Asia specific one.  Note ARTYX...although great recent run.

--Use ETFs to enable small size purchases...as min amounts to buy do not exist.

--FOCUS ON A PORTFOLIO ALLOCATION THAT BUILDS IN SOME TEACHING, AS WELL AS EVENTUAL RETURNS.  That is, consider developing a full asset allocation approach (such as including some small cap ETFs), into a portfolio.  This becomes the teaching model for daughter going forward.  (BTW our grand-daughters at early ages own a share of "Big Brown"...and every time the truck makes a delivery, parents teach what it means to own such a share!)

-------------------------------------------------------------------

Good luck...

R48

 

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Frequent Contributor

Re: New Roth for 16 y/o daughter

Definitely 100% in equity at her age; Maybe 50% FXAIX/50% FDGRX (closed) or FBGRX.  

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Re: New Roth for 16 y/o daughter

@Graust 

If you really want your daughter to LEARN from the process, have her invest in individual stocks.  At Fidelity or Schwab for example, she could easily invest that $1,000 in ten different stocks.  It would be a plus if she selected some of the stocks.  Much more is learned from individual stock ownership than from a mutual fund or ETF. 

ctyankee 

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Re: New Roth for 16 y/o daughter

"At Fidelity or Schwab for example, she could easily invest that $1,000 in ten different stocks."

Fidelity allows the purchase of fractional shares (<1) so it wouldn't even take $1,000.  I'm not sure but I think it might only be available for users of their app.

I believe Schwab also offers fractional trading but I don't know details.

R48: I don't believe doing chores is sufficient if you are referring to household chores.  If you mean business chores okay but I don't think I would refer to them as chores.  They have to do work.

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Re: New Roth for 16 y/o daughter


@Graust wrote:

To start off, I am comfortable managing my own (and my family's) portfolios, and have experience in OEFs/CEFs, stocks, bonds, options, etc. I am mostly a dividend/dividend growth/income investor (especially with my parents' portfolios), but sometimes have a hard time being a "pure growth/total return" investor. LOL.

 

My daughter got her first job this summer, and I told her I would put the money she gets paid into a Roth IRA (I know I should have her contribute also, but she's a good kid and has a pretty good idea--as much as a 16 year old can--of the value of money). So it will probably be less than $1K total this year. And it's at Fidelity. I am tempted to put every thing into FSPTX and call it good, but my thought was a 50/50 QQQ/SCHD vs VIG portfolio (Fido allows dollar buys into certain stocks and ETFs). Or just throw it into a tech ETF or OEF or VUG?

 

In the grand scheme of things it probably doesn't matter to her long term wealth (she has wealthy grandparents who have set up a trust for her, provided she completes her education and makes good life decisions). But it will also be an exercise in her participating in investing.

 

Thoughts?

 

Thanks in advance


         To show your daughter how easy it is to be rich in 50 years have her put if all in an S&P index fund on reinvestment. That way between that and her apparent good fortune maybe she can have a richer life not so centered on money and things.

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Re: New Roth for 16 y/o daughter


@steelpony10 wrote:




 

 

 

 

 

 

 

 

 



   To show your daughter how easy it is to be rich in 50 years have her put if all in an S&P index fund on reinvestment. That way between that and her apparent good fortune maybe she can have a richer life not so centered on money and things.


Ah, but that's the problem.

Heirs getting money/wealth comes with responsibility...responsibility to see that it is managed and spent properly. Can't duck the matter.  

The hardest thing there is is to keep money over a couple generations, especially with financially illiterate heirs.  There are millions of people doing geneoaogy searches who discover once having wealthy ancestors, but zero wealth remaining today.  Witness lottery winning wealth.  Poof.

Best is to teach early...and often, including some spending themes that may involve charitable giving....caring for others, especially the less fortunate.

R48

 

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Re: New Roth for 16 y/o daughter

    


@retiredat48

Ah, but that's the problem.

Heirs getting money/wealth comes with responsibility...responsibility to see that it is managed and spent properly. Can't duck the matter.  

The hardest thing there is is to keep money over a couple generations, especially with financially illiterate heirs.  There are millions of people doing geneoaogy searches who discover once having wealthy ancestors, but zero wealth remaining today.  Witness lottery winning wealth.  Poof.

Best is to teach early...and often, including some spending themes that may involve charitable giving....caring for others, especially the less fortunate.

R48

           I think different I suppose. Half my kids get it and half don’t. You can lead a horse to water...... 

            My parents exited with zero. Their wealth got widely redistributed beyond a small group of heirs. All I had to do was watch my mother count the cash from my dad’s check when I was young after my father and his friend had started their business in the 50’s. I saw I needed backup with anything I did. So I learned. I won’t do what they did if I have a choice.

             I’am here to answer any reasonable questions about anything not use my position as a parent as an excuse to mettle in their lives. Evolution is a cruel teacher so I wait. Ha. Ha.
  
             

 


 

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