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I read this board but don't post. My oldest grandson is 21, and a senior in college. He's interested in starting to invest, probably beginning with $1000, in a Roth IRA, most likely (if there are any funds with a minimum of $1000). I'd like suggestions on one good mutual fund for him. Thank you in advance.
It's not a fund per se, but Schwab has introduced "stock slices", where he could invest as little as $5 to purchase a partial share in companies such as Amazon, Google, Facebook, Netflix, McDonald's, Electronic Arts, Nike, Home Depot, Target and Apple. They advertise that you can buy a basket of all 10 for $50.
Not a suggestion ... Just what I'm doing for my grandaughter. However, this concept might be of some help.
I have my 18 month old granddaughter in AMECX, CAIBX, ANCFX and SMCWX at American Funds, The min. for each fund is $250.00. I make quarterly gift contributions to her account splitting the money evenly. Her mutual fund distributions pay to AFAXX which is a money market fund to accumulate until they become invested into ABALX which is a balanced fund. In this way she will have an awarness of just how much interest, dividends and capital gain distributions play in the overall sucess of investing. I'm thinking over time ABALX will become larger that the first four starting funds by the time she becomes 21 (age of majority).
Even though this is invested conseratively it is up better than 8% over the past rolling year. At her age and with the many years she has ahead I feel a conserative steady as you go approach is the wise one over an agressive growth portfolio that will have, at times, some good volatility associated with it. This might lead one into trading over staying invested for the long term.
I became an investor as a teenager at age 12 (1960). I started investing with some money my great grandparents gifted to me. And, it was put into Franklin Income (FKINX). My father's broker told me that this fund will give you some exposure to income generation (put a little gingle in your pocket if you wish) and also give you exposure to both stocks and bonds as well. It will be a good fund for you to build a base from and help you to understand the facets of investing. My next fund that I ventured into was American Funds Income Fund of America (AMECX) during my early twenties as I was learning don't put all you eggs in one basket, by this time. Today, these two funds are my largest holdings within my portfolio now just short of fifty funds split among twelve investment sleeves. I went the conserative route in the beginning and branched out from there. Now stock market volatility is viewed, by me, as a buying opportunity. While some run and sell ... I am a buyer even at the age of 72. I bought during the past market swoon and now that stocks have recovered I have been selling into the now present market strength.
If you wish to view how the asset allocation, of my grandaughter's portfolio bubles, or any of the other suggestions that has been made, below is a link to Morningstar's Instant Xray analysis tool. It's a good tool to learn how to use.
Just enter the ticker symbols and amount invested in each fund then press Xray and the Portfolio Xray analysis will appear. For my granddaughter, I felt it wise to mix some income generation funds on the income side with some value and growth stocks funds on the equity side. Sometimes, with the income generation that protfolios produce keeps folks invested. My late father had a saying ... "Income never goes out of style." Thus far, in my lifetime, he has been correct.
Your grandson can follow his portfolio through M*'s portfolio manager which is another tool I use.
My best wishes to you and your grandson in starting this endeavor. It is something that he can begin small and build upon through his lifetime. In the years to come he will remember ... this is something my grandmother got me started me on. And, give thanks that you did.
Most (if not all) of the funds at T Rowe Price have a $1,000 minimum for an IRA (including Roths). Not the lowest expense ratio in town, but reasonable. You’d be setting him up with one of the most respected outfits out there.
First $1,000 POMIX - T. Rowe Price Total Market Index fund. That’s the one Jack Bogle always recommended as his top choice index. ER .30%
Next $1,000 PIEQX - T Rowe Price Developed Markets Ex-North America index fund. ER .45%
Thereafter - two-thirds of contributions to former and one-third to latter.
Sure, there’s a lot of great managed funds out there (of which I own some). But with a 50-year investment horizon, index is the way to go. Lower fees (not visible at first glance) and you avoid potential managerial changes and / or mistakes.
If you can find the $1,000 minimum somewhere else offering those indexes, than of course you can elect them. I’m pretty much T. Rowe so not aware of minimums at other houses. But I’d think the $1,000 minimum is going the way of the plasma TV. (rapidly disappearing). Also, T. Rowe is no-load. I think some of the ones with lower initial investments charge a front-end load, which you don’t want.
VLAAX - Value Line Asset Allocation Fund Investor Class for long term performance and growth.
And as Mike suggested below QQQ or similar (I use the Fidelity ETF - FTEC) for the reasons he mentioned. Or if you believe alternative energy and solar will be the future than something like ICLN or TAN which are both ETF's.
Edited to add: I would be remiss if I didn't add that I would not be a buyer of any of those ETF's at present. They are all richly priced. However if the market takes a tumble then jump on board.
Thank you all so much for your suggestions. I'm going to look at each one everyone suggested, and will help him decide. I'm glad he's thinking about this, and with his long timeline horizon, he should do well. And he'll learn about investing as he goes along. Again, thanks so much.
Generally, Fidelity funds have a $0 min. Likewise, Schwab offers 60 house funds (Schwab and Laudus) with no mins. In addition, Schwab offers nearly 3K outside funds at a $100 min, including 110 from T. Rowe Price. (All figures are for open, NTF funds) Fidelity Screener Schwab screener
If you like buying stocks or ETFs by the price instead of by the share, Fidelity lets you do this. Minimum purchase per security is $1. Other, smaller brokerages like Robinhood offer this as well, but with their payments for order flow, you'll likely get poorer execution. (There are additional concerns about these brokerages pushing trades because they make money based on the volume of trading.)
Two points: stick with name brand brokerages and funds, and focus on the investment and not on the minimums.
Of course this depends on your grandson, but for a first investment I might suggest a more traditional "growth and income" type of fund like a basic S&P 500 index fund (e.g. VOO or FXAIX) or an actively managed fund like PRBLX (through Schwab with a $100 min NTF).
On the one hand, a novice investor can get spooked by sizeable drops in value. On the other hand, as a long term investment, one leans toward equity. A hybrid fund like @P_F 's suggested VGSTX could also make sense if one wants to start off more conservatively.
An S&P 500 fund starts one off with a familiar name, adding (one hopes) a measure of comfort. Otherwise I'd suggest a total stock market index fund. The Parnassus fund is a fine long term actively managed vehicle, with a socially conscious bent as an added plus.
Hi Donna! I suggest you buy him some good books also. Seems like so many 21 year old men think they can “discover” half a dozen gems, ride them for a couple of years and retire at age 30. And of course, that’s just not realistic. My suggestion would be William Bernstein’s “If you Can”. https://etf.com/docs/IfYouCan.pdf
I may be only thinking of a data set of one (yours truly) but when I was 22 a broker called singing the praises of Data I/O and convinced me to open a margin account.
Schwab Total Stock Market Index Fund -- SWTSX: 0.03% expense ratio (10x less than the Price version). Schwab has a very good website and local branches. Personally, I'd steer clear of actively managed funds for reasons of cost and the fact that most don't do better than the market long term.
Donna As you say, your grandson will begin to learn the ropes pretty quickly (once he has skin in the game). So you're not trying to select a fund that he'll have to keep forever. He's young and has time on his side, so he can be adventurous. QQQ or a technology oriented fund would be appropriate.
This strikes a chord with me -- this week my 15-year old grandson called wanting advice about stocks (he had inherited a little money from his other grandparents). We talked about possibilities, but he made his own decisions. Of course, as soon as something went up a dollar, he wanted to sell it! My strongest recc. was SMH (semiconductors ETF). Volatile ( he had to look up this word) but will probably beat the market in the long run. I've had FSELX, the Fidelity semiconductors (managed )Select Semiconductors fund in my IRA and in my wife's Roth IRA for years and it has been very strong (especially recently).
Are you providing his initial investment (which is perfect as long as he has actually worked and earned some money)? My grandaughter just graduated from college and started working; I told her I'd match what she wanted to put in a Roth IRA. It turned out that she'd made about $6000 working last year, so she could open a Roth for that much -- my 3K and her 3K. My real goal is to get her engaged in the investment process.
This will be fun; let us know what you grandson decides. David
@msf - Does that mean that if I send $10.00 (ten-dollars) to Fidelity I can open 10 accounts in the amount of $1 each in 10 different funds? If so, I’m just crazy enough to do it!
Donna, At 21, he has a very long investing time-horizon. That fact might steer me, in your situation, to BIAWX. Brown Advisory Sustainable Growth. That Brown family of funds offers other funds. I'm impressed by none of the others. BIAWX owns all growth stocks, no bonds at all. As he gets nearer to middle age, his portfolio should be much more diversified. You can start into BIAWX with just $100 and additional increments of $100. ...Right now, however, the stock market is very richly priced. And particularly since BIAWX owns big, high-flying growth stocks, it's time to WAIT for a pull-back.
BIAWX has risen quite a bit, since the market has begun its stimulus-induced climb from the market-bottom in March. It's up by almost +20%, since January 1st, and in relative terms, that's astronomical growth!
@msf - Does that mean that if I send $10.00 (ten-dollars) to Fidelity I can open 10 accounts in the amount of $1 each in 10 different funds? If so, I’m just crazy enough to do it!
Yup. I just entered an order for $1 of FLPSX, and the system took it. I immediately cancelled the order. Have fun!
P.S. The better paying (if you can call it that) MMFs have higher mins.
Just went through this same drill. Would have preferred Vanguard, but they aren’t worried about young investors trying to get started with less than $3k. Went with TRMCX (Recently reopened) with minimum investment of $1k. At 21, and in a Roth, he can tolerate volatility and tax inefficiency - so another approach is to look for something high yield. Save the index funds for taxable accounts. I wish I had been more cognizant of the tax implications choices I was making 20 years ago would have on my current situation.
I read this board but don't post. My oldest grandson is 21, and a senior in college. He's interested in starting to invest, probably beginning with $1000, in a Roth IRA, most likely (if there are any funds with a minimum of $1000). I'd like suggestions on one good mutual fund for him. Thank you in advance.
FSKAX has outperformed FZROX over the latter's lifetime, YTD, and over the latter's lifetime excluding YTD (just in case one figured that this year skewed the lifetime numbers).
The two funds follow different indexes: FZROX follows a Fidelity proprietary index; FSKAX follows a DJ index. The main difference though seems to be that FZROX has more difficulty tracking its benchmark.
Over its lifetime (since 8/2/18), it has returned almost 70 basis points less, cumulatively, than its benchmark. Give or take, that's about a 35 basis point tracking error per year. Over the same period of time, FSKAX beat its respective benchmark by a basis point.
There's the marketing hype of 100% lower expenses (0% vs 1.5 basis points). Then there's the reality of money in one's pocket.
Having already having checked out your figures before giving numbers, I would have offered an explanation for the discrepancy after your 12:10 post.
Now I'll just offer the observation that many people like to post numbers without citing sources. I usually do better when posting numbers. Try to do better when reading them. It's called hypertext for a reason.
Right idea. Unfortunately that only gets one half way. The only benchmark on the page is for FZROX. To see the FSKAX benchmark one needs to start with an FSKAX chart.
@msf - Does that mean that if I send $10.00 (ten-dollars) to Fidelity I can open 10 accounts in the amount of $1 each in 10 different funds? If so, I’m just crazy enough to do it!
Yup. I just entered an order for $1 of FLPSX, and the system took it. I immediately cancelled the order. Have fun!
P.S. The better paying (if you can call it that) MMFs have higher mins.
Yes “better paying” is perfect.
How does one pay the $10 house fee? Most casinos accept credit cards. Would Fidelity take a $10 debit from one of my bank cards? Playing a gold fund (or 2 or 3 at a time) would be a lot of fun. Where else can you pocket a 15-20% gain in a few days? And, if in a Roth the winnings would be a tax-free.
Hate to be so inquisitive. But I’ve never invested outside my direct accounts at a few old-fashioned houses. To my knowledge, no one has ever characterized T. Rowe or D&C as “fun” or “exciting.”
@hank - thanks for the last paragraph, otherwise I might have read the whole post as tongue in cheek.
Seriously, opening up a Fidelity (or any brokerage) account is little different from opening up a mutual fund account. If you do open up an account, don't spend the whole $10 in one place. Diversify
One opens an account online here. (Look for the headings: Investing and Trading for taxable accounts, Saving for Retirement for IRAs).
Brokerage accounts all have a settlement (what Fidelity calls a "core") account. This is essentially your "checking" account for the brokerage. Fidelity currently gives you three choices for a core taxable account. Government MMF (SPAXX), Treasury MMF (FZFXX), and a sweep account. That's where the cash is put into bank accounts (semi-invisibly) and you earn bank interest (0.01%) instead of divs on the MMFs (0.01%). Any money you deposit into the brokerage account first goes into whatever your core account is.
After you open the brokerage account, you'll be offered the option of funding it. Fidelity should offer you funding choices: transferring cash from a bank account via EFT or mailing a check, possibly other ways. The EFT won't work with your debit card (I believe) but will take money from the account underlying your debit card. You need the routing number and account number to set this up.
Once your deposit clears, you're free to make online trades up to your full, incredible amount of $10. Fidelity is pretty good in that it usually makes cash available for trading quickly, even though it will hold cash deposits for several days if you want to withdraw that money. When you purchase something, it will show up as a separate holding in the same brokerage account.
Comments
Not a suggestion ... Just what I'm doing for my grandaughter. However, this concept might be of some help.
I have my 18 month old granddaughter in AMECX, CAIBX, ANCFX and SMCWX at American Funds, The min. for each fund is $250.00. I make quarterly gift contributions to her account splitting the money evenly. Her mutual fund distributions pay to AFAXX which is a money market fund to accumulate until they become invested into ABALX which is a balanced fund. In this way she will have an awarness of just how much interest, dividends and capital gain distributions play in the overall sucess of investing. I'm thinking over time ABALX will become larger that the first four starting funds by the time she becomes 21 (age of majority).
Even though this is invested conseratively it is up better than 8% over the past rolling year. At her age and with the many years she has ahead I feel a conserative steady as you go approach is the wise one over an agressive growth portfolio that will have, at times, some good volatility associated with it. This might lead one into trading over staying invested for the long term.
I became an investor as a teenager at age 12 (1960). I started investing with some money my great grandparents gifted to me. And, it was put into Franklin Income (FKINX). My father's broker told me that this fund will give you some exposure to income generation (put a little gingle in your pocket if you wish) and also give you exposure to both stocks and bonds as well. It will be a good fund for you to build a base from and help you to understand the facets of investing. My next fund that I ventured into was American Funds Income Fund of America (AMECX) during my early twenties as I was learning don't put all you eggs in one basket, by this time. Today, these two funds are my largest holdings within my portfolio now just short of fifty funds split among twelve investment sleeves. I went the conserative route in the beginning and branched out from there. Now stock market volatility is viewed, by me, as a buying opportunity. While some run and sell ... I am a buyer even at the age of 72. I bought during the past market swoon and now that stocks have recovered I have been selling into the now present market strength.
If you wish to view how the asset allocation, of my grandaughter's portfolio bubles, or any of the other suggestions that has been made, below is a link to Morningstar's Instant Xray analysis tool. It's a good tool to learn how to use.
https://www.morningstar.com/instant-x-ray
Just enter the ticker symbols and amount invested in each fund then press Xray and the Portfolio Xray analysis will appear. For my granddaughter, I felt it wise to mix some income generation funds on the income side with some value and growth stocks funds on the equity side. Sometimes, with the income generation that protfolios produce keeps folks invested. My late father had a saying ... "Income never goes out of style." Thus far, in my lifetime, he has been correct.
Your grandson can follow his portfolio through M*'s portfolio manager which is another tool I use.
My best wishes to you and your grandson in starting this endeavor. It is something that he can begin small and build upon through his lifetime. In the years to come he will remember ... this is something my grandmother got me started me on. And, give thanks that you did.
Old_Skeet
edited on 7/23/2020
First $1,000 POMIX - T. Rowe Price Total Market Index fund. That’s the one Jack Bogle always recommended as his top choice index. ER .30%
Next $1,000 PIEQX - T Rowe Price Developed Markets Ex-North America index fund. ER .45%
Thereafter - two-thirds of contributions to former and one-third to latter.
Sure, there’s a lot of great managed funds out there (of which I own some). But with a 50-year investment horizon, index is the way to go. Lower fees (not visible at first glance) and you avoid potential managerial changes and / or mistakes.
If you can find the $1,000 minimum somewhere else offering those indexes, than of course you can elect them. I’m pretty much T. Rowe so not aware of minimums at other houses. But I’d think the $1,000 minimum is going the way of the plasma TV. (rapidly disappearing). Also, T. Rowe is no-load. I think some of the ones with lower initial investments charge a front-end load, which you don’t want.
And as Mike suggested below QQQ or similar (I use the Fidelity ETF - FTEC) for the reasons he mentioned. Or if you believe alternative energy and solar will be the future than something like ICLN or TAN which are both ETF's.
Edited to add: I would be remiss if I didn't add that I would not be a buyer of any of those ETF's at present. They are all richly priced. However if the market takes a tumble then jump on board.
RSP is another one, simply SP500 but equally weighted
Fidelity Screener
Schwab screener
If you like buying stocks or ETFs by the price instead of by the share, Fidelity lets you do this. Minimum purchase per security is $1. Other, smaller brokerages like Robinhood offer this as well, but with their payments for order flow, you'll likely get poorer execution. (There are additional concerns about these brokerages pushing trades because they make money based on the volume of trading.)
Two points: stick with name brand brokerages and funds, and focus on the investment and not on the minimums.
Of course this depends on your grandson, but for a first investment I might suggest a more traditional "growth and income" type of fund like a basic S&P 500 index fund (e.g. VOO or FXAIX) or an actively managed fund like PRBLX (through Schwab with a $100 min NTF).
On the one hand, a novice investor can get spooked by sizeable drops in value. On the other hand, as a long term investment, one leans toward equity. A hybrid fund like @P_F 's suggested VGSTX could also make sense if one wants to start off more conservatively.
An S&P 500 fund starts one off with a familiar name, adding (one hopes) a measure of comfort. Otherwise I'd suggest a total stock market index fund. The Parnassus fund is a fine long term actively managed vehicle, with a socially conscious bent as an added plus.
I suggest you buy him some good books also. Seems like so many 21 year old men think they can “discover” half a dozen gems, ride them for a couple of years and retire at age 30. And of course, that’s just not realistic. My suggestion would be William Bernstein’s “If you Can”. https://etf.com/docs/IfYouCan.pdf
I may be only thinking of a data set of one (yours truly) but when I was 22 a broker called singing the praises of Data I/O and convinced me to open a margin account.
As you say, your grandson will begin to learn the ropes pretty quickly (once he has skin in the game). So you're not trying to select a fund that he'll have to keep forever.
He's young and has time on his side, so he can be adventurous. QQQ or a technology oriented fund would be appropriate.
This strikes a chord with me -- this week my 15-year old grandson called wanting advice about stocks (he had inherited a little money from his other grandparents). We talked about possibilities, but he made his own decisions. Of course, as soon as something went up a dollar, he wanted to sell it! My strongest recc. was SMH (semiconductors ETF). Volatile ( he had to look up this word) but will probably beat the market in the long run. I've had FSELX, the Fidelity semiconductors (managed )Select Semiconductors fund in my IRA and in my wife's Roth IRA for years and it has been very strong (especially recently).
Are you providing his initial investment (which is perfect as long as he has actually worked and earned some money)? My grandaughter just graduated from college and started working; I told her I'd match what she wanted to put in a Roth IRA. It turned out that she'd made about $6000 working last year, so she could open a Roth for that much -- my 3K and her 3K. My real goal is to get her engaged in the investment process.
This will be fun; let us know what you grandson decides.
David
@msf - Does that mean that if I send $10.00 (ten-dollars) to Fidelity I can open 10 accounts in the amount of $1 each in 10 different funds? If so, I’m just crazy enough to do it!
At 21, he has a very long investing time-horizon. That fact might steer me, in your situation, to BIAWX. Brown Advisory Sustainable Growth. That Brown family of funds offers other funds. I'm impressed by none of the others. BIAWX owns all growth stocks, no bonds at all. As he gets nearer to middle age, his portfolio should be much more diversified. You can start into BIAWX with just $100 and additional increments of $100. ...Right now, however, the stock market is very richly priced. And particularly since BIAWX owns big, high-flying growth stocks, it's time to WAIT for a pull-back.
BIAWX has risen quite a bit, since the market has begun its stimulus-induced climb from the market-bottom in March. It's up by almost +20%, since January 1st, and in relative terms, that's astronomical growth!
P.S. The better paying (if you can call it that) MMFs have higher mins.
The two funds follow different indexes: FZROX follows a Fidelity proprietary index; FSKAX follows a DJ index. The main difference though seems to be that FZROX has more difficulty tracking its benchmark.
Over its lifetime (since 8/2/18), it has returned almost 70 basis points less, cumulatively, than its benchmark. Give or take, that's about a 35 basis point tracking error per year. Over the same period of time, FSKAX beat its respective benchmark by a basis point.
There's the marketing hype of 100% lower expenses (0% vs 1.5 basis points). Then there's the reality of money in one's pocket.
Done.
FZROX Life +6.00% vs its proprietary index +5.96%
http://quotes.morningstar.com/chart/fund/chart.action?t=fzrox
click Maximum
Fido index is included, then add FSKAX
Now I'll just offer the observation that many people like to post numbers without citing sources. I usually do better when posting numbers. Try to do better when reading them. It's called hypertext for a reason.
How does one pay the $10 house fee? Most casinos accept credit cards. Would Fidelity take a $10 debit from one of my bank cards? Playing a gold fund (or 2 or 3 at a time) would be a lot of fun. Where else can you pocket a 15-20% gain in a few days? And, if in a Roth the winnings would be a tax-free.
Hate to be so inquisitive. But I’ve never invested outside my direct accounts at a few old-fashioned houses. To my knowledge, no one has ever characterized T. Rowe or D&C as “fun” or “exciting.”
Seriously, opening up a Fidelity (or any brokerage) account is little different from opening up a mutual fund account. If you do open up an account, don't spend the whole $10 in one place. Diversify
One opens an account online here. (Look for the headings: Investing and Trading for taxable accounts, Saving for Retirement for IRAs).
Brokerage accounts all have a settlement (what Fidelity calls a "core") account. This is essentially your "checking" account for the brokerage. Fidelity currently gives you three choices for a core taxable account. Government MMF (SPAXX), Treasury MMF (FZFXX), and a sweep account. That's where the cash is put into bank accounts (semi-invisibly) and you earn bank interest (0.01%) instead of divs on the MMFs (0.01%). Any money you deposit into the brokerage account first goes into whatever your core account is.
After you open the brokerage account, you'll be offered the option of funding it. Fidelity should offer you funding choices: transferring cash from a bank account via EFT or mailing a check, possibly other ways. The EFT won't work with your debit card (I believe) but will take money from the account underlying your debit card. You need the routing number and account number to set this up.
Once your deposit clears, you're free to make online trades up to your full, incredible amount of $10. Fidelity is pretty good in that it usually makes cash available for trading quickly, even though it will hold cash deposits for several days if you want to withdraw that money. When you purchase something, it will show up as a separate holding in the same brokerage account.