McFly1955;1088437 wrote:Hell yeah, I wish someone thought to do that for me

I was just disagreeing with the not having to worry about retirement part

I was hoping that his kids do something productive with their lives and have a retirement plan of their own, then that gift you gave them would make retirement easy.

ernest_t_bass;1088423 wrote:I only put in $600/year.

Looks like she will be getting married at the courthouse.

ernest_t_bass;1087886 wrote:Should I buy the $1, $5, or $10 kind?

Whatever, just make sure you buy them in Georgia!

Aside from the 529 (which I know very little about), with horizons of at least 12 and 16 years, you really won't beat a diversified portfolio. Should easily compound at 5%+ annually with that time horizon.

No need to pay an adviser or even hefty mutual fund fees (that extra 50-100bps+ can add up). A very rough and fairly conservative rule of thumb would be 60% equity indexes, 30% bond indexes, and 10% commodity indexes. You want some international exposure (broad, like Europe/Asia/South America), as well, probably 25% (careful of emerging markets, though) - IShares, Powershare and SPDR's are all good ETF's. You can get that international exposure for both equity and bonds/fixed income in ETF's, also. One caveat is you pick-up some additional commodity exposure with countries like Canada, Australia and Argentina/Venezuela/Brasil. Be careful of REITS as there can be valuation traps, and you can pick-up inflation protection with additional international/commodity exposure. The other lever to pull is picking a blend of growth/value equity. I like local currency ETF's for international to pick-up some protection with a long-term view of a weakening dollar.

If you really want to be a miser and keep yourself from chasing returns, just contribute quarterly and allocate those contributions toward rebalancing according to that 60/30/10 rule.

What about a 10 year cd?

OneBuckeye;1088304 wrote:From a guy with 32 posts no less. You struck gold!

I'm a lurker, not much of a poster.lol

Take $1000.00 plus what is already in the their banking account and put into a compound interest account.
http://www.mathsisfun.com/money/compound-interest.html
http://www.moneychimp.com/calculator/compound_interest_calculator.htm


If your kids are smart and have some skills than college will be partly paid for ....

However if you're looking for a future saving account for your kids .. down the road ... compound interest saving account..

password;1088450 wrote:Looks like she will be getting married at the courthouse.

She'll have well over $10,000 to go towards a wedding. For the mother/father part, I would love to assume that we would have raised her to where that would be plenty, with some left over!

gut;1088513 wrote:(careful of emerging markets, though)

That's the thing. I'm not investing in something where I have to "be careful." I just want a higher return than I am currently receiving, but not something risky enough to the point I could take a hit... since I'm doing this for my daughters.

Crimson streak;1088572 wrote:What about a 10 year cd?

This was my first thought, but I had heard that their interest rates really aren't much greater than what I am currently receiving (I haven't done my homework yet). I'd get an add-on CD, so I could keep direct depositing.

Belly35;1088582 wrote:Take $1000.00 plus what is already in the their banking account and put into a compound interest account.
http://www.mathsisfun.com/money/compound-interest.html
http://www.moneychimp.com/calculator/compound_interest_calculator.htm


If your kids are smart and have some skills than college will be partly paid for ....

However if you're looking for a future saving account for your kids .. down the road ... compound interest saving account..

Belly, I don't need a lesson on compound interest, but if you can find me a savings account with 10% interest, I'm all ears!

Best advice at this time would be... Ammo and Canned goods!


I KNOW this helped.

ernest_t_bass;1088586 wrote:She'll have well over $10,000 to go towards a wedding. For the mother/father part, I would love to assume that we would have raised her to where that would be plenty, with some left over!

In 15 yrs, when she gets married to the man of her dreams $10,000 will help a little toward a wedding. The money would be better invested for long term security for her. You can always hope that she marries a rich guy who wants to pay for the wedding himself. The one question I have for you, would you let your daughter marry a school teacher or would you encourage her to set her standards higher?

we started this shortly after the birth of our children. had automatic checking withdrawels deposited in a mutual fund (we used janus, but nearly every major mutual fund group and brokers such as Fidelity and Schwab would be good options. The stock market is a crap shoot right now, but over he next 20 years odds are you'll make more money than in a savings account. Used it for their college education---helped immensely!!

ricola;1089038 wrote:we started this shortly after the birth of our children. had automatic checking withdrawels deposited in a mutual fund (we used janus, but nearly every major mutual fund group and brokers such as Fidelity and Schwab would be good options. The stock market is a crap shoot right now, but over he next 20 years odds are you'll make more money than in a savings account. Used it for their college education---helped immensely!!

How much did you make?

password;1088976 wrote:In 15 yrs, when she gets married to the man of her dreams $10,000 will help a little toward a wedding. The money would be better invested for long term security for her. You can always hope that she marries a rich guy who wants to pay for the wedding himself. The one question I have for you, would you let your daughter marry a school teacher or would you encourage her to set her standards higher?

Those were my thoughts as well. In 20 years that $10,000 might not go so far.

ernest_t_bass;1088589 wrote:That's the thing. I'm not investing in something where I have to "be careful." I just want a higher return than I am currently receiving, but not something risky enough to the point I could take a hit... since I'm doing this for my daughters.

You don't Have to invest in any funds with material emerging market exposure. A diversified portfolio over 10+ years is going to crush any overly conservative or "safe" investment. You cannot go down the path of money market or cd's - you likely WILL underperform inflation.

Just stick with US ETF's if you want to keep it simple and fairly "riskless". Put 30% in an S&P500 index (broad market/value exposure), and 15% in a NASDAQ (tech/growth expsoure) and 15% in a Russell 2000 (small cap/growth/value exposure). Done. You'll lose a little return without having material international exposure, but about 80% of equity returns are industry driven and this gives you it all in a simple, easy way.

Stick another 30% into a few diversified fixed income/aggregate bond funds. A lot of these buying almost exclusively treasuries and muni's will outperform what you'll get with money markets and cd's, but still pretty shity returns (such bond funds are more or less a place to park cash while waiting for buying opportunities if something with more juice). What you really want is an investment grade corporate bond fund for most of this 30% fixed income allocation. Me I'd dip into high yield, but you'll want to stay away since it's on par with emerging markets. I'm sure you can get some decent recs from people on this board of good funds with low expense ratios.

Put the remaining 10% into a commodity index. Choices here are pretty limited - you don't want just gold or oil. GSG is an ishares ETF tracking the Goldman Commodity index and probably the safest/best way (along with a similar Powershares ETF ticker DBC) to get some commodity exposure. Me, I also like an Energy ETF here because we're in a cyclical bull market for energy.

On average you'll do just as well as people paying a lot for financial advise because rarely do they outperform the market enough to justify the added expense to you. In most cases, they're just selling you information similar to what I've posted above that is readily available very cheap, even free, around the web and in many books.

Actually, over the next few weeks I need to do some rebalancing of my own. I'll be happy to share my allocations and my rationale. I'm actually not real aggressive, and stick almost exclusively with low-fee ETF's. You can easily create a conservative portfolio from my choices because any good investment allocation has a base allocation to conservative/staple choices.

ernest_t_bass;1089066 wrote:How much did you make?

Different for each of the kids, because of the timimg of the ups and downs of the market. Awesome until the 1st crash 10 years back, and the 2nd 4 yras ago or so. But even with those huge selloffs, made more than in in any money market acct.

Belly35;1088582 wrote:Take $1000.00 plus what is already in the their banking account and put into a compound interest account.

If your kids are smart and have some skills than college will be partly paid for ....

Have you LOOKED at interest rates in the last 3-4 years? His return will absolutely BLOW on 2-3% interest whether it's compounded or not. He'll be lucky to pace inflation.

With a 10+ year horizon, there are plenty safe investments with superior risk-adjusted returns. Yeah, for 2-3 years he might want to look at a CD or an aggregate bond fund but he'll do better in a investment grade corporate bond fund. On the .01% chance he doesn't, the world will have gone to hell and we're all screwed anyway.

gut;1089591 wrote:Have you LOOKED at interest rates in the last 3-4 years? His return will absolutely BLOW on 2-3% interest whether it's compounded or not. He'll be lucky to pace inflation.

With a 10+ year horizon, there are plenty safe investments with superior risk-adjusted returns. Yeah, for 2-3 years he might want to look at a CD or an aggregate bond fund but he'll do better in a investment grade corporate bond fund. On the .01% chance he doesn't, the world will have gone to hell and we're all screwed anyway.

What are some examples of an investment grade corporate bond fund?

ernest_t_bass;1089614 wrote:What are some examples of an investment grade corporate bond fund?

http://money.usnews.com/funds/mutual-funds/intermediate-term-bond/pimco-investment-grade-corporate-bond-fund/pbdax

Just one example. Do a search for investment grade corporate bond funds. This may not be the example as they are engaging in some riskier strategies (short exposure, interntational), but PIMCO is probably the best bond-house out there.

Safer still would be bond funds investing US-only, and not taking short positions. The other thing to look for is duration - longer duration funds carry more negative interest rate exposure in today's environment (i.e., if and when interest rates start increasing, bond prices move the opposite direction so longer duration funds are hurt proportionally more).

The last decade has shown fixed income can outperform equities for long periods of time (not the first it's happened, either, just the longest and most profound). But this has largely been driven by the absurdly low interest rate environment. So fixed income has a place in any good portfolio allocation, but I only recommend about 30% exposure for your time frame because rates will eventually start to increase and long-only, long-duration bond funds will suffer.

The key point about investment grade corporates is they are generally almost as safe as US treasuries but pay higher interest rates. A lower duration fund has shorter average maturities, so it rolls over more frequently and will more closely track inflation (+ a premium) as the new corporate issues will always carry a premium to the current prevailing interest rates.
http://money.usnews.com/funds/mutual-funds/short-term-bond/vanguard-short-term-investment-grade-fund/vfstx

I'm not recommending these funds, just showing an example. Really, my advice is to invest in a book or two as opposed to paying an adviser. You simply want broad exposure to fixed income and equity (30-70% either way) and some commodity exposure (10-20% is typically recommended). Fairly hard to screw that up. Past performance is not a guarantee of future success, but a 5+ yr track record does give you an idea of how the fund has been managed - if there is a spike or abnormal period of either under or over performance, simply stay away. The other thing to look for are low expense ratios (why I go the ETF route because most funds do not outperform ETF's by enough to justify their higher fees, much less continue to do so).

Most advisers are simply going to profile your risk preferences and punch some numbers into a program that will spit out a small deviation from the norms I've recommended. A lot of times, too, they get commissions and so have incentive to recommend higher-expense funds that is not ultimately in your best interest.

This looks like a decent primer I found with a quick internet search. You don't need many ETF's or mutual funds to create such an allocation. It's broad enough in most cases that 2-3 targeting similar exposure provides a little extra protection against mismanagement or incompetence. Like, for example, you really only need one Vanguard or Powershares ETF tracking the S&P500, but if for some reason you want that particular equity exposure through mutual funds you should divide equally between 2-3 funds.
http://www.investopedia.com/articles/pf/05/061505.asp

Here's another with some basics. By the way, the only reason to hold actual cash in an account is if you are waiting for buying opportunities of individual stocks. Most mutual funds will hold 3-6% cash at any given time, sometimes more (and we don't really like to pay someone managing our money to hold cash!). If you want to be overly conservative, your "cash" allocation should be in a some sort of asset paying interest (usually pegged on brokerage accounts with "guaranteed return" or "money market/cd) - my choice would be a fund or ETF investing in short-term US treasuries. Now, you don't see commodity allocation recommended here. 20% is pretty high-risk, but 10% is good. Commodities will keep going up with growth in the global economy, but it is very volatile. My choice is also protection against a long-term bearish view on the dollar.

http://www.wellsfargoadvantagefunds.com/wfweb/wf/retirement/start/portfolios.jsp?sel=%2fDTF%2fRetirement%2fAlready_Saving%2fAlready_Step2%2fStep2_Asset_Strategies