investing $40

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onion tribe
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investing $40

Post by onion tribe »

My middle school son has been asking me about investing. I sat him down and gave him a mini-lecture on index funds, low fees, etc. Since I have an inactive taxable account with Vanguard (after I had transferred all the money in there to a trust account), I told him we could put some play money in there so he can watch it go up and down. He gave me $40 to invest. I thought we could do an ETF since my understanding was there is no minimum to invest with an ETF. My son chose VTI. However, upon trying to buy, we discovered Vanguard doesn't offer fractional shares. Ooops.

I think Fidelity allows buying fractional shares but this means I have to set up a fidelity account. Any else I need to worry about? I didn't think investing $40 would be difficult.
pkcrafter
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Re: investing $40

Post by pkcrafter »

Nothing wrong with using Fidelity, take a look at this Fidelity option...
There is a 0% expense ratio and no minimums to invest in FZROX.
https://www.fidelity.com/mutual-funds/i ... ndex-funds


Paul
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aristotelian
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Re: investing $40

Post by aristotelian »

M1 Finance will do fractional shares so you can purchase ETF's the same way as mutual funds. The "pie" platform is nice and intuitive for kids. I have used it to introduce both my kids to investing.

Fidelity has a new Youth Account that is actually owned by the minor (not UTMA or joint account) for age 13 & up. You could do Fidelity mutual funds with no minimum there.
livesoft
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Re: investing $40

Post by livesoft »

One can buy 1 share of SPAB or SPDW with less than $40. Of course, your child could do some chores to earn another $15 and they could buy 1 share of SPTM then. Or you could gift them $15 to add to their stash and buy a share of SPTM.

Personally, I like the "earn it" method because it is more like Real Life.
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kelway
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Re: investing $40

Post by kelway »

aristotelian wrote: Fri Sep 24, 2021 9:35 pm M1 Finance will do fractional shares so you can purchase ETF's the same way as mutual funds. The "pie" platform is nice and intuitive for kids. I have used it to introduce both my kids to investing.

Fidelity has a new Youth Account that is actually owned by the minor (not UTMA or joint account) for age 13 & up. You could do Fidelity mutual funds with no minimum there.
+1 for M1. It's truly the optimal platform for diversified investing.
SnowBog
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Re: investing $40

Post by SnowBog »

pkcrafter wrote: Fri Sep 24, 2021 9:08 pm Nothing wrong with using Fidelity, take a look at this Fidelity option...
There is a 0% expense ratio and no minimums to invest in FZROX.
https://www.fidelity.com/mutual-funds/i ... ndex-funds


Paul
Personally, I would not purchase FZROX in a taxable account. The fund itself is fine (its my primary fund in my 401k), but you'll never be able to move those shares to another brokerage firm (should you ever want to). So I personally only buy ETF's when possible in taxable for improved flexibility.

However, I'm a very happy Fidelity customer. They even have a teen account which might be ideal for what you want. https://www.fidelity.com/go/youth-account/overview

Fidelity does support buying and selling fractional shares, so you should be able to buy $40 of VTI if you wish.

Similar choices could be ITOT and SCHB.
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Re: investing $40

Post by Mr. Rumples »

Many, many years ago, my uncle bought me one - I think it was one - share of Martin Marietta when I was 13. I then sold it and bought something else which went bust...lesson learned early and hence even though the money was gone, it was perhaps some of the best I had ever spent. I'd just find a fund with no minimum that he can play with and see what happens. I admit total ignorance of tax issues regarding this.
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AnnetteLouisan
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Re: investing $40

Post by AnnetteLouisan »

An 8 year old who chooses VTI is unusual. why not a “fun” stock like Lego, Hershey or Disney? He might read the annual reports. 😄
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retiredjg
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Re: investing $40

Post by retiredjg »

Fidelity's index target fund series is diversified and has no minimums.
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Re: investing $40

Post by LadyGeek »

I removed a post and reply discussing investment in bitcoin. As a reminder, cryptocurrency as an investment is off-topic. See: Greater Fool Investing Strategies
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ruralavalon
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Re: investing $40

Post by ruralavalon »

At Fidelity in a taxable brokerage account I suggest either Vanguard Total Stock Market ETF (VTI) or iShares Core S&P Total US Stock Market ETF (ITOT).
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Wannaretireearly
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Re: investing $40

Post by Wannaretireearly »

livesoft wrote: Fri Sep 24, 2021 10:20 pm One can buy 1 share of SPAB or SPDW with less than $40. Of course, your child could do some chores to earn another $15 and they could buy 1 share of SPTM then. Or you could gift them $15 to add to their stash and buy a share of SPTM.

Personally, I like the "earn it" method because it is more like Real Life.
I'm enticing the kids by setting a $1500 target. First to get there will get a $100 bonus. They already have about 1200 each (accumulated bday cash and gifts). They are pretty good at walking on backs, massages and pedicures for cash deposits into their accounts 😄.

I do want them to start investing some of the cash. Maybe 50% so they learn AA benefits?
I need to look into M1. Ideally, a vanguard account would tie in best, so that I can look at it all in place. Similar to bofa and their linked checking/savings accounts today...
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runninginvestor
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Re: investing $40

Post by runninginvestor »

First to answer your question, yes you can do Fidelity. The zero fee funds can't be transferred in kind to other brokerages. At $40 that won't really matter.

Can I offer another suggestion?

If you are able, and wanting to get them interested in the investment world. Possibly:
1. Open an M1 account [edit: or fidelity youth account for fractional shares] and have them pick 2-3 companies that interest them. Read the annual reports, proxy vote, etc. Easier to do if interested in those companies. Can help enhance business literacy.

2. Match the $40 and other contributions in a broad index fund in your own account.

3. Every year check which performs better.

4. Gift your index fund you've been matching when they become an adult. Hopefully with much appreciation, by the find and your child.
Last edited by runninginvestor on Sat Sep 25, 2021 10:06 am, edited 1 time in total.
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Re: investing $40

Post by ruralavalon »

I would not want to encourage stock picking, at M1 or anywhere else, even at just $40.

Even as an experiment (versus indexing) it might start a bad habit.
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Re: investing $40

Post by LadyGeek »

SnowBog wrote: Fri Sep 24, 2021 11:04 pm Personally, I would not purchase FZROX in a taxable account. The fund itself is fine (its my primary fund in my 401k), but you'll never be able to move those shares to another brokerage firm (should you ever want to). So I personally only buy ETF's when possible in taxable for improved flexibility.

However, I'm a very happy Fidelity customer. They even have a teen account which might be ideal for what you want. https://www.fidelity.com/go/youth-account/overview

Fidelity does support buying and selling fractional shares, so you should be able to buy $40 of VTI if you wish.

Similar choices could be ITOT and SCHB.
The Fidelity Youth Account is in the wiki. See: Accounts for children (Fidelity Youth Account)
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Re: investing $40

Post by sycamore »

AnnetteLouisan wrote: Sat Sep 25, 2021 7:43 am An 8 year old who chooses VTI is unusual. why not a “fun” stock like Lego, Hershey or Disney? He might read the annual reports. 😄
Hershey or Disney are stocks, yes, but Lego is not a publicly-held company :(
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Re: investing $40

Post by willthrill81 »

A middle-schooler with $40 would probably do a lot better to buy several cases of bottled water with it, ice it in a cooler, and sell it for $1-$2 each at a local event. The returns will be far, far higher.
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Re: investing $40

Post by Thesaints »

Investing $40 does really nothing as far as getting a financial culture is concerned.
My advice would be to let the kid spend the money and instead ask him to track a virtual portfolio where he invests $1000 in VTI monthly and another portfolio where he invests $1000 in Tesla, also monthly.
Not only he would eventually get a grasp of the meaning of volatility and the consequences of diversification, but he would also experience how saving a good chunk of one's salary can eventually translate into a sizable capital.

If one relly wants to play with $40, VTI is probably the last asset one wants to acquire. Even if one would get a 10x growth (which will not happen with VTI) portfolio would still be only $400, i.e. almost nothing, even for a kid.
In such situation one would want to "invest" in the most volatile asset out there, up to and including a lottery ticket.
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Re: investing $40

Post by SnowBog »

I'll disagree... If the child decided to invest some money, I'd be happy if they wanted to learn "what I'd do".

BH approach may not be "exciting" for a teenager, but if it becomes a discipline they follow, I know they'll have a successful future.

If they were encouraged to spend the money (that as I understand it they asked to invest), or put it into an "exciting" or "fun" investment - then they risk being pre-wired to think that way going forward.

Personally, all of my child's money (that they get from birthdays, etc.) is sitting in a bank account. I'm waiting for them to be interested... And then the comparison will be against just leaving thy money in a bank...

(While it's technically their money, my child does not know about their 529, UTMA, etc. and I do invest those on their behalf.)
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Re: investing $40

Post by Thesaints »

$40 are really nothing. There will be no concern about losing them, nor joy in getting the kind of return typical of any traditional investment.
Therefore, there will be no more learning in addition to what one could learn using a fictitious account.
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Re: investing $40

Post by SnowBog »

IMHO the amount is irrelevant...

I'd be happy that they were "leaning to save and invest", and would want to model "what I'd do".

Same as we try to do when they present us with a "challenge" in their life. We try not to trivialize it as a childish problem, or being "too small" to matter. We try to listen, ask questions, and if they want offer our thoughts on "how we'd approach that situation".

I'm not expecting they want to learn about modern portfolio theory, risk adjusted returns, etc. At their age, I'll take the small wins...
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Re: investing $40

Post by Thesaints »

The amount is actually everything. One would not invest the same way $10,000 and $100,000,000. Kids can learn the mechanics with paper trades just as well, in fact, better since they can even do options.
SnowBog
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Re: investing $40

Post by SnowBog »

Thesaints wrote: Sat Sep 25, 2021 4:06 pm The amount is actually everything. One would not invest the same way $10,000 and $100,000,000. Kids can learn the mechanics with paper trades just as well, in fact, better since they can even do options.
Actually I would... It would be invested according to my AA.
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Cheez-It Guy
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Re: investing $40

Post by Cheez-It Guy »

Give him $1000 to buy the minimum for STAR or Target Retirement, and let him add his $40.
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Re: investing $40

Post by Jazztonight »

Cheez-It Guy wrote: Sat Sep 25, 2021 4:41 pm Give him $1000 to buy the minimum for STAR or Target Retirement, and let him add his $40.
Bingo! This is what I did with my son when he was a teen. He's now in his 40s, owns his own business as well as a rental income, and is invested in a balanced fund at Vanguard. Funny thing, though, he's more Jack Bogle-ish than I in that he rarely if ever looks at his fund; he just continues to invest regularly and automatically. Must have been that STAR fund.
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SnowBog
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Re: investing $40

Post by SnowBog »

Cheez-It Guy wrote: Sat Sep 25, 2021 4:41 pm Give him $1000 to buy the minimum for STAR or Target Retirement, and let him add his $40.
What is a STAR? I assume it's not the kind in the sky...
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Re: investing $40

Post by ruralavalon »

SnowBog wrote: Sat Sep 25, 2021 5:03 pm
Cheez-It Guy wrote: Sat Sep 25, 2021 4:41 pm Give him $1000 to buy the minimum for STAR or Target Retirement, and let him add his $40.
What is a STAR? I assume it's not the kind in the sky...
Vanguard STAR Fund (VGSTX) ER 0.31%.

"This balanced fund is invested 60% in stocks and 40% in bonds. It offers investors exposure to ten underlying actively managed Vanguard funds—including domestic and international stock funds and U.S. bond funds—each with its own distinct investment approach. It may be considered a “one fund option” for investors looking for broad diversification across asset classes who can tolerate moderate market risk that comes from the volatility of the stock and bond markets."

The initial minimum investment is $1,000.
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Re: investing $40

Post by Charon »

Thesaints wrote: Sat Sep 25, 2021 3:53 pm $40 are really nothing. There will be no concern about losing them, nor joy in getting the kind of return typical of any traditional investment.
Therefore, there will be no more learning in addition to what one could learn using a fictitious account.
Spoken like someone who is not in middle school.

However, for that age I'd consider working on encouraging saving, rather than actual investment. You can see a bank account balance grow with diligent saving, whereas investing has its ups and downs. ("We expect the market to rebound in five to ten years" isn't the most convincing argument to someone who's 13.)

And we know savings rate is actually the most important thing, more so than asset allocation and certainly more so than expense ratios. I'd defer the investment discussion at least until they have a job.
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Re: investing $40

Post by wetgear »

ruralavalon wrote: Sat Sep 25, 2021 9:48 am I would not want to encourage stock picking, at M1 or anywhere else, even at just $40.

Even as an experiment (versus indexing) it might start a bad habit.
+1
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Re: investing $40

Post by Monsterflockster »

You all have some interesting kids. My middle schooler is interested in YouTube, video games for some reason the titanic. My 8 year old... toys and dolls. 🤣
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Re: investing $40

Post by WingsFan4Life »

SnowBog wrote: Fri Sep 24, 2021 11:04 pm
pkcrafter wrote: Fri Sep 24, 2021 9:08 pm Nothing wrong with using Fidelity, take a look at this Fidelity option...
There is a 0% expense ratio and no minimums to invest in FZROX.
https://www.fidelity.com/mutual-funds/i ... ndex-funds


Paul
Personally, I would not purchase FZROX in a taxable account. The fund itself is fine (its my primary fund in my 401k), but you'll never be able to move those shares to another brokerage firm (should you ever want to). So I personally only buy ETF's when possible in taxable for improved flexibility.

However, I'm a very happy Fidelity customer. They even have a teen account which might be ideal for what you want. https://www.fidelity.com/go/youth-account/overview

Fidelity does support buying and selling fractional shares, so you should be able to buy $40 of VTI if you wish.

Similar choices could be ITOT and SCHB.
+1 for ITOT in taxable
Thesaints
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Re: investing $40

Post by Thesaints »

SnowBog wrote: Sat Sep 25, 2021 4:35 pm
Thesaints wrote: Sat Sep 25, 2021 4:06 pm The amount is actually everything. One would not invest the same way $10,000 and $100,000,000. Kids can learn the mechanics with paper trades just as well, in fact, better since they can even do options.
Actually I would... It would be invested according to my AA.
And how do you determine your AA ?
SnowBog
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Re: investing $40

Post by SnowBog »

Thesaints wrote: Sat Sep 25, 2021 7:39 pm
SnowBog wrote: Sat Sep 25, 2021 4:35 pm
Thesaints wrote: Sat Sep 25, 2021 4:06 pm The amount is actually everything. One would not invest the same way $10,000 and $100,000,000. Kids can learn the mechanics with paper trades just as well, in fact, better since they can even do options.
Actually I would... It would be invested according to my AA.
And how do you determine your AA ?
Based on how close we are to retirement (both in terms of finances and timeline).

As we are close now, we've already shifted to 60/40 - and will stay there for the foreseeable future. Once we retire, and in particular as we approach when social security and pensions kick in, we'll start to shift back towards either 70/30 or 80/20 (TBD).

I think the idea of getting $100M is a bit absurd, so I won't pretend that I considered that seriously. But more realistically, if we got say a $1M inheritance - we'd still invest it according to our AA (after taking a nice trip!).

But again more realistically, we are talking about a child learning how to "save" and "invest" their own money. And my view is the amount isn't overly relevant. Whether my child had $5, $50, $5000 or $50000 I'd still "encourage" them to do something aligned to BH Principles, hoping to enforce the "slow and steady win the race" mentality when it comes to investing. My hope is as they start to "earn" income, I'll teach them to save/invest 15%+ of that amount. (Currently my child isn't really interested on spending money - so either I'm very lucky thus far - or they just haven't hit their teenage stride yet... :wink: )
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