Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
34,759 posts, read 58,150,330 times
Reputation: 46262
Advertisements
Bonds at the moment are pretty inflated on nav (price, not yield),
Be careful... For a 12 yr old, I would not put much allocation in cash yield, that sector is under a lot of pressure from retirees who must stay conservative.
But is that with the 0.3% annual account fee? Or are those ETF's just a little more expensive on the expense ratio side? I'm imagining the Sanford & Son episode where the room was free but the cookies the guy was eating were $20.
No annual fee. The ER varies by ETF of course. The total US stock market ETF VTI has an ER of .05%.
Advantages of index funds are lower cost, because you're not paying somebody to research and to try to time the market, and the fact that the majority of stock pickers don't consistently beat the index funds anyhow. (Also, selling something to buy something else may increase your capital gains taxes.) If you buy an actively managed mutual fund that charges 1% more per year than a low-cost index fund (this cost is known as the expense ratio) then that fund manager would have to get returns 1% better than the index fund just for you to break even.
At your level of investment, I'd go with the VTI. Be aware that this "total market" is the US market only, and since the stock holdings are weighted by market cap, the largest part of it will be the S&P 500 (the largest stocks in the US market.) For a better explanation of this, I'd search on the bogleheads forum link somebody else provided earlier.
As you continue to invest more money for your kids, I would add shares of VT, which is the total international market fund, that is, everything except US stocks. Again, because European and other developed countries have more and larger companies publicly traded, the largest part of your money in this fund will be in the developed not emerging markets. Once you have the two funds, I would keep them balanced at about 2:1 of VTI:VT, not by selling any of the winner but by buying more of whichever is lagging, to keep them balanced.
Sorry this is wordy and repeats some of previous posts, hope it helps, and good job getting your kids saving now!
The etf VTI has a very low expense ratio and will cost $8.95 per transaction.The same in a mutual fund will probably be more expensive an expense ratio and there is usually a $72.00 fee to buy or sell.
This article on the Assetbuilder website is suggestion for low cost funds for kids
One issue with these specific set of Index funds is they are newly created and as such have no true market history of success or failure because they have not been tested but Fidelity is a reputable platform, has some excellent low cost Mutual Funds and ETFs--and you can buy other funds--not just Fidelity's when you have an account there...
It has good platform for information/research and the times I had to use a storefront the people were nice and helpful...
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
