I understand that we need to focus our personal retirement before focusing on savings for our children. Our son is fortunate to have received about $15k in cash gifts for his birthday, holidays and his christening. We parked some in a 529. But we opened a Vanguard account on his behalf, as well, in case he choses not to go the school route. Which mutual funds would you recommend that we park the rest of his money - as a Target Index Fund wouldn’t make sense in this case. He is 18 months old. Thank you!
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For saving for school, I actually think a target date fund could be a great choice. Obviously you’re not targeting retirement, but you’re targeting a date when the money is to be spent (i.e. when he’s 18-22 years old). Inside of a target date fund it’s pretty simple. Just stock and bond index funds that transition to bonds as the target date approaches (and passes). That seems like a reasonable investment strategy to me for college savings.
If you are just talking about generic “long term future money with maximum growth” for your child, not necessarily with a plan to spend when he is 18, I’d probably just go with one or two index funds. Some ideas:
- VTWAX: This one fund essentially owns all of the stocks in the world (8,859 as of this post). It’s market cap weighted, so about 60% of the stocks are from North America, and the rest from the rest of the world. Owning this and only this guarantees your son his fair share of the world’s future growth.
- VTSAX & VTIAX: This is essentially the same strategy as above, but a lot of people like to break up US and non-US stocks so they can do a further US tilt. So you could do something like 70% VTSAX, 30% VTIAX.
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A 3-fund portfolio: Essentially the same as above but with a bond component added. Although at 18 months I think it is reasonable to skip the bonds for a few decades.
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