Gyroscopic Investing

Posted: **Sun Sep 25, 2022 4:47 pm**

Someone asked me about instead of giving traditional gifts for her grandchildren she instead help get them started on their investing careers.

Her first one up is $250 for one of her grandchildren.

What would you advise?

My initial reaction would be some investment at Vanguard. But I don't know if they will take an initial investment into one of their funds with that small an amount.

From my quick Bing seach it seems like Vanguard's minimums are about $1,000. However, Fidelity has this fund which has no minimum and seems highly appropriate for a 19 year old?

https://fundresearch.fidelity.com/mutua ... /315911628
Fidelity ZERO® Large Cap Index Fund

Then it seems that it should be a Roth investment since this would be presumably the lowest tax bracket each child would be in during their working lives? But that would not be the simplest investment to make and may be too time consuming for that amount of investment.

Posted: **Sun Sep 25, 2022 4:54 pm**

yankees60 wrote: ↑Sun Sep 25, 2022 4:47 pm Someone asked me about instead of giving traditional gifts for her grandchildren she instead help get them started on their investing careers.

Her first one up is $250 for one of her grandchildren.

What would you advise?

My initial reaction would be some investment at Vanguard. But I don't know if they will take an initial investment into one of their funds with that small an amount.

Then it seems that it should be a Roth investment since this would be presumably the lowest tax bracket each child would be in during their working lives? But that would not be the simplest investment to make and may be too time consuming for that amount of investment.

As a thought.... Have them open a 529 plan for the grandkid - used for college, private school or any approved higher education - then any amount can be gifted in the child's name.

Posted: **Sun Sep 25, 2022 5:09 pm**

GT wrote: ↑Sun Sep 25, 2022 4:54 pm

yankees60 wrote: ↑Sun Sep 25, 2022 4:47 pm
Someone asked me about instead of giving traditional gifts for her grandchildren she instead help get them started on their investing careers.

Her first one up is $250 for one of her grandchildren.

What would you advise?

My initial reaction would be some investment at Vanguard. But I don't know if they will take an initial investment into one of their funds with that small an amount.

Then it seems that it should be a Roth investment since this would be presumably the lowest tax bracket each child would be in during their working lives? But that would not be the simplest investment to make and may be too time consuming for that amount of investment.

As a thought.... Have them open a 529 plan for the grandkid - used for college, private school or any approved higher education - then any amount can be gifted in the child's name.

Thanks. I'm seeing that as a recommendation in some of the articles I've found subsequent to what I wrote above. However, what happens to the balance if the grand child never has the opportunity to use it for approved higher education?

Also, if you or I were the grandchild wouldn't you want this to be an account which is not going to be consumed by higher education expenses but will, instead, be first account which would continue to grow post-college (if college does happen)?

On the other hand ... when filing for financial aid aren't the colleges going to want ALL of any of the children's investments? If so, that would then push it to being a Roth account as I assume the college would not expect the child to withdraw from a retirement / Roth account?

Posted: **Sun Sep 25, 2022 5:26 pm**

Open an account at fidelity where they sell partial shares and get $125 of SP500 and $125 of SCV

Posted: **Sun Sep 25, 2022 5:39 pm**

joypog wrote: ↑Sun Sep 25, 2022 5:26 pm
Open an account at fidelity where they sell partial shares and get $125 of SP500 and $125 of SCV

I think that is an excellent account. A good one for someone NOT going to college and, therefore, NOT applying for financial aid.

However, if one IS applying for financial aid for college isn't the college effectively going to take the entire balance in the account by reducing financial aid by the exact amount in the account?

I read this here:

https://www.savingforcollege.com/articl ... =full_post

"How 7 Different Assets can Affect your FAFSA and Financial Aid Eligibility

How Much do Student Assets Affect FAFSA?
Do student assets affect FAFSA? Generally speaking, yes.

In fact, students are expected to contribute a higher proportion of their assets, up to 20%, to pay for their own college education. Therefore, student assets typically can have a greater impact on financial aid eligibility than their parents’ assets."

This seems to buttress making it a Roth investment:

"Assets that are not counted by FAFSA when determining your EFC include:

401(k) and Roth and traditional IRA accounts (though withdrawals from Roth IRA accounts will be counted as untaxed income)"

Posted: **Sun Sep 25, 2022 7:12 pm**

Vinny,

You are aware that a person needs to have earned income in order to contribute to a Roth, right?

Posted: **Sun Sep 25, 2022 7:17 pm**

yankees60 wrote: ↑Sun Sep 25, 2022 5:09 pm
GT wrote: ↑Sun Sep 25, 2022 4:54 pm
yankees60 wrote: ↑Sun Sep 25, 2022 4:47 pm Someone asked me about instead of giving traditional gifts for her grandchildren she instead help get them started on their investing careers.

Her first one up is $250 for one of her grandchildren.

What would you advise?

My initial reaction would be some investment at Vanguard. But I don't know if they will take an initial investment into one of their funds with that small an amount.

Then it seems that it should be a Roth investment since this would be presumably the lowest tax bracket each child would be in during their working lives? But that would not be the simplest investment to make and may be too time consuming for that amount of investment.
As a thought.... Have them open a 529 plan for the grandkid - used for college, private school or any approved higher education - then any amount can be gifted in the child's name.
Thanks. I'm seeing that as a recommendation in some of the articles I've found subsequent to what I wrote above. However, what happens to the balance if the grand child never has the opportunity to use it for approved higher education?

Also, if you or I were the grandchild wouldn't you want this to be an account which is not going to be consumed by higher education expenses but will, instead, be first account which would continue to grow post-college (if college does happen)?

On the other hand ... when filing for financial aid aren't the colleges going to want ALL of any of the children's investments? If so, that would then push it to being a Roth account as I assume the college would not expect the child to withdraw from a retirement / Roth account?

Here is a pretty good article from Consumer reports on the 529 - just food for thought.
https://www.consumerreports.org/paying- ... 20below%29.

I liked the 529 myself and I thought my kids will be doing something higher education wise (trade school - 2 year associates ) - I also liked the fact that anyone can contribute to the 529 in the child's name; with no minimum contribution amount. At the time my kids were too young for the Roth as they did not have any job earnings.

Here is an article on the 529 versus financial aid - Maybe able to judge how a 529 would help, hurt or not make that much of a difference
https://www.savingforcollege.com/intro- ... .64%25.%20

Again, we had to wait on the Roth as our children did not have jobs so a Roth could not be funded - If the Child in question has a job - A Roth is a great option!
https://www.finweb.com/retirement/what- ... n%20income.

If the child is really young, then just a savings account would be my guess. I could see the money being used for a 1st car or you can always move to a Roth or a 529 in the future

TBH if I was the child, I would just want the money now -

Posted: **Sun Sep 25, 2022 7:40 pm**

Regarding the FAFSA: if the parents have too much income, there won’t be any financial aid anyway. And it’s not that hard to get to that point.

Posted: **Sun Sep 25, 2022 7:43 pm**

flyingpylon wrote: ↑Sun Sep 25, 2022 7:40 pm
Regarding the FAFSA: if the parents have too much income, there won’t be any financial aid anyway. And it’s not that hard to get to that point.

In this case the parents do not have that much income. The grandmother, though, does. Therefore she is in position to do this for her grandchildren while the parents are not.

Posted: **Sun Sep 25, 2022 7:47 pm**

GT wrote: ↑Sun Sep 25, 2022 7:17 pm

yankees60 wrote: ↑Sun Sep 25, 2022 5:09 pm

GT wrote: ↑Sun Sep 25, 2022 4:54 pm

yankees60 wrote: ↑Sun Sep 25, 2022 4:47 pm
Someone asked me about instead of giving traditional gifts for her grandchildren she instead help get them started on their investing careers.

Her first one up is $250 for one of her grandchildren.

What would you advise?

My initial reaction would be some investment at Vanguard. But I don't know if they will take an initial investment into one of their funds with that small an amount.

Then it seems that it should be a Roth investment since this would be presumably the lowest tax bracket each child would be in during their working lives? But that would not be the simplest investment to make and may be too time consuming for that amount of investment.

As a thought.... Have them open a 529 plan for the grandkid - used for college, private school or any approved higher education - then any amount can be gifted in the child's name.

Thanks. I'm seeing that as a recommendation in some of the articles I've found subsequent to what I wrote above. However, what happens to the balance if the grand child never has the opportunity to use it for approved higher education?

Also, if you or I were the grandchild wouldn't you want this to be an account which is not going to be consumed by higher education expenses but will, instead, be first account which would continue to grow post-college (if college does happen)?

On the other hand ... when filing for financial aid aren't the colleges going to want ALL of any of the children's investments? If so, that would then push it to being a Roth account as I assume the college would not expect the child to withdraw from a retirement / Roth account?

Here is a pretty good article from Consumer reports on the 529 - just food for thought.
https://www.consumerreports.org/paying- ... 20below%29.

I liked the 529 myself and I thought my kids will be doing something higher education wise (trade school - 2 year associates ) - I also liked the fact that anyone can contribute to the 529 in the child's name; with no minimum contribution amount. At the time my kids were too young for the Roth as they did not have any job earnings.

Here is an article on the 529 versus financial aid - Maybe able to judge how a 529 would help, hurt or not make that much of a difference
https://www.savingforcollege.com/intro- ... .64%25.%20

Again, we had to wait on the Roth as our children did not have jobs so a Roth could not be funded - If the Child in question has a job - A Roth is a great option!
https://www.finweb.com/retirement/what- ... n%20income.

If the child is really young, then just a savings account would be my guess. I could see the money being used for a 1st car or you can always move to a Roth or a 529 in the future

TBH if I was the child, I would just want the money now -

This is all excellent and gives me much to further to pursue once I get more clarification from the grandmother where she now stands on the basis of what I've already sent to her.

In regards to your last sentence .... it was actually the grandaughter asked her grandmother that instead of getting a traditional birthday gift that the grandmother help her invest. That's basically every parent's dream? A child that does not want to consume now but who wants to invest in the future?

Posted: **Sun Sep 25, 2022 9:19 pm**

19 year old in college? Best investment is increasing their human capital. So it should go to paying for college before anything else.

Posted: **Sun Sep 25, 2022 9:33 pm**

whatchamacallit wrote: ↑Sun Sep 25, 2022 9:19 pm
19 year old in college? Best investment is increasing their human capital. So it should go to paying for college before anything else.

I do not know the 19 year old's college status. However, she has expressed getting starting in investing rather than being given a consumable birthday gift. So I'm 100% behind honoring that desire.

Posted: **Sun Sep 25, 2022 10:08 pm**

Personally I think that money should be used to educate on how to invest.
Say, purchase BelangP's book, and if you can, split it 65/35 on TSM/Gold ETF as a training tool.

https://evidencebasedwealth.com/?page_id=2
https://www.youtube.com/user/belangp/videos

Posted: **Sun Sep 25, 2022 10:17 pm**

Hal wrote: ↑Sun Sep 25, 2022 10:08 pm
Personally I think that money should be used to educate on how to invest.
Say, purchase BelangP's book, and if you can, split it 65/35 on TSM/Gold ETF as a training tool.

https://evidencebasedwealth.com/?page_id=2
https://www.youtube.com/user/belangp/videos

Maybe later on ...when the amount are higher and the person has committed to investing?

Now I think it should be easy and simple to implement to get the young person hooked on investing for the long-term.

Posted: **Mon Sep 26, 2022 4:39 am**

Have them buy VTI and EDV. They'll learn about markets: bid/ask, limit order duration etc.

Inserting politics for the lulz: VTI and EDV are poised to shoot up when the money printer restarts approaching the 2024 election. "Its the economy stupid" https://www.youtube.com/watch?v=Ygln5S-9hIw

Posted: **Mon Sep 26, 2022 7:20 am**

It's always interesting to discuss young people and how to best get them off to a good start in their investing lives. But this thread has surprising legs for an investment of $250!

Posted: **Mon Sep 26, 2022 7:46 am**

barrett wrote: ↑Mon Sep 26, 2022 7:20 am It's always interesting to discuss young people and how to best get them off to a good start in their investing lives. But this thread has surprising legs for an investment of $250!

Well, to add to the discussion, this book for teenage boys/young men was interesting and amusing

Posted: **Mon Sep 26, 2022 7:58 am**

Looks like a cool book

With such a small amount, $250, I would keep it simple.

Either an S&P500 ETF in Fidelity — because you’re right about the $1000 minimum for Vanguard funds —
or even a savings bond. A savings bond is not going to lose and might be better to watch for the next 12 months than a falling stock fund. In 12 months, the next $250 could go into stocks.

Posted: **Mon Sep 26, 2022 8:09 am**

dualstow wrote: ↑Mon Sep 26, 2022 7:58 am Looks like a cool book

It is! Also did a talk on the PP a few years back.
https://www.youtube.com/watch?v=fswWHYhQSgE

Posted: **Mon Sep 26, 2022 8:16 am**

Alternate approach: give them $250 to put in a Robinhood account and just let them have at it. We are talking about a 19 year old after all.

My son did that on his own at 18 and learned some lessons that were worth far more than $250 in the long run. Helped that he was using his own money though.

Posted: **Mon Sep 26, 2022 10:34 am**

Desert wrote: ↑Mon Sep 26, 2022 8:12 am And watching a falling stock fund is the best education an investor can get, in my opinion.

I agree, and perhaps it’s better to watch $250 drop than $25,000, but I hate to kill her desire to invest just as it’s budding.

Posted: **Mon Sep 26, 2022 10:56 am**

flyingpylon wrote: ↑Mon Sep 26, 2022 8:16 am
Alternate approach: give them $250 to put in a Robinhood account and just let them have at it. We are talking about a 19 year old after all.

My son did that on his own at 18 and learned some lessons that were worth far more than $250 in the long run. Helped that he was using his own money though.

I'm now rating this one as the best suggestion yet! Puts it much closer to the perspective of a 19 year old than someone near our ages.

Posted: **Mon Sep 26, 2022 10:57 am**

dualstow wrote: ↑Mon Sep 26, 2022 10:34 am

Desert wrote: ↑Mon Sep 26, 2022 8:12 am
And watching a falling stock fund is the best education an investor can get, in my opinion.

I agree, and perhaps it’s better to watch $250 drop than $25,000, but I hate to kill her desire to invest just as it’s budding.

It may kill her desire in the type of investing that should really be called speculating or gambling. But may teach her what TRUE investing is. For the long-term and not to double or triple your investment in a short period of time.

Posted: **Mon Sep 26, 2022 12:17 pm**

Yep, hope so. That’s definitely the idea.

Posted: **Mon Sep 26, 2022 12:38 pm**

I don't think the Roth & Robinhood ideas are necessarily mutually exclusive. I see all this online chatter from several months ago that Robinhood was planning add both Roth and tIRA options. Not sure if it's actually been implemented yet.

Again, though, the grand kid has to have earned income up to the amount of the Roth contribution. Maybe the grandma can pay the kid $250 for researching the Robinhood Roth options.

Gyroscopic Investing

$250 investment for a 19 year old?

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