My son is currently 2 and I've been setting aside money each week from a paycheck into a savings account. The plan is to give him the money when he is 18 for him to use as he sees fit (within reason of course). I've decided against a 529 plan because the only benefit from it would be the taxes. This account won't have hundreds of thousands in it (20K would be nice) so it's not that big of a deal. I'd rather him not have to use it strictly for school because who knows what he'll want to do with his life. Anyway, I'm trying to decide on where to invest the money. I'm not afraid of having risk since the money has 16 years to grow/recover. The simple answer is investing in an ETF like SPY or VOO. What I'm curious about are growth ETFs like MGK, VONG, VUG and VOOG. These all show impressive growth over the past 5-10 years when compared to SPY and VOO. I realize it's because of the larger exposure to tech and that it could all change at some point especially given the current situation with COVID. It seems like a no-brainer to choose one of these to have the money grow the most for my son in this time-frame but I'm not sure if I'm missing anything. Is it really this simple? Would choosing a growth ETF and holding it for 10 years then switching to VOO be more reasonable? It depends on a lot of factors but I just want to see if my understanding is correct. *edit* I forgot to put originally that this will be an automatic investment plan. I'll be dollar cost averaging the whole time with whichever ETF I choose. Also, I do have a small amount that I'll be using to buy in initially but think I'm going to hold off for a bit with the current market conditions. I know you can't time the market but I don't think this type of market is sustainable much longer. If I'm wrong then hopefully it doesn't cost us too much.
This is my Roth IRA, I love every single etf and stock I have in there, plus they all pay every month. https://m1.finance/7ah6d9xUuKtK
Great thing to do for your son, and very mature of you to not "force" him to go to college in order to get the money. I see lots of parents doing that, which I view as insulting to the child who may choose a different path in life, which doesn't make it wrong. I'd recommend a ROTH IRA since you don't want to worry about the account of his being taxed when the money comes out. For which ETF to choose, I can't really help you there. I'd suggest tracking the S&P, but I'm no expert on which ETF is best because I'm not a long-term investor. Maybe @TomB16 can chime in about picking the correct ETF for a long-term hold?
Thanks for the response. Yours seem to be higher dividend paying stocks which I considered but I think given the time frame and willingness to take a change on higher risk the growth stocks might be a better option. Thanks for your input. I realize there's a lot of families/parents out there who have the money to set up a 529 with the expectation the child will be going to some ivy league school but that's not us. I did the 4 year degree thing, got out during the GFC when there were no jobs and now have an ordinary job making just as much as people with no college education at all. I wish I could go back and tell myself to do a trade school since that's the kind of stuff I'm into and enjoy doing in my free time but that's not what was "in" back then. My wife and definitely will not be pushing him to go to college if he doesn't think that's what he wants.
Thank you for the vote of confidence. I've had my tail handed to me enough times to know I shouldn't be picking winners and losers for other people. I will say I think the key to successful investing is to believe in your portfolio. Without that, you just end up selling the first time it takes a dip and that leaves no chance for success. A year ago, I would have chimed in to just buy VOO and rise with the market but VOO appears to be a value trap now. At this point, I don't see any good options. Frankly, I don't think it would be a mistake to just remain cash for 12 months and watch the market for a dip and indications of the start of an inflation curve to pay for this mess we find ourselves in. Again, I won't recommend anything directly but, if I was starting a savings plan right now, I'd put it into a high interest savings account and wait at 0.75% annual gain. I'm impressed with GIRM's portfolio. He is going to do well, over time. I look forward to learning more from him. Many people, preeminently WXYZ on this site, advocate to actively avoid timing the market and just buy S&P 500 continually over time. I have a lot of respect for this approach. It has proven to be the right way to invest through nearly every era. I apologize for not being more helpful. It's just that you're asking me to pick the cabin with the best view and I just returned from the bridge where RADAR showed we are about to enter a huge storm. Q2 is almost over. Q2 financials will start coming out in about a month and trail in for another month after that. How do you suppose those are going to look? The WBI is at 146.5. We are at the start of fever pitch election campaigning. Mr. Dude might not be an advanced investor looking to navigate market vicissitudes, he seems like someone looking for a starkly simple, low risk, approach but it is extremely difficult to tell someone to hold their nose and jump into this cesspool, right now.
TomB, Thank you for your response I do really appreciate it. I do agree with you that I think there will be a dip at some point and I will be holding the money until there is. Will I get it at it's lowest or even in the first dip? I highly doubt it but it just doesn't seem like the right time to invest the money right now. I will be dollar cost averaging over time long-term though but an upcoming dip almost doesn't get more obvious than right now. Do you have any thoughts on growth ETFs? I completely understand too that you're not choosing an investment for me and I will not be basing a decision soley off your post.
