ETFs for children's scholarship fund

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MrCurious
Posts: 39
Joined: Mon Aug 10, 2020 9:42 am
Location: Bosnia / Croatia

ETFs for children's scholarship fund

Post by MrCurious »

Hi guys! :happy

My sister and I recently became parents at the same time.

We were thinking of investing a part of our savings in a scholarship fund for our children.

This means that our time horizon would be roughly 18 years.

Given that this time horizon is perhaps a bit longer than for an average investor, what do you think our asset allocation should be?

My initial idea was to make it simple and invest everything in FTSE All-World UCITS ETF (VWRL), but I am open to other ideas as well :sharebeer
Valuethinker
Posts: 49035
Joined: Fri May 11, 2007 11:07 am

Re: ETFs for children's scolarship fund

Post by Valuethinker »

MrCurious wrote: Wed Aug 04, 2021 3:46 am Hi guys! :happy

My sister and I recently became parents at the same time.

We were thinking of investing a part of our savings in a scholarship fund for our children.

This means that our time horizon would be roughly 18 years.

Given that this time horizon is perhaps a bit longer than for an average investor, what do you think our asset allocation should be?

My initial idea was to make it simple and invest everything in FTSE All-World UCITS ETF (VWRL), but I am open to other ideas as well :sharebeer
EDIT: I am writing all this assuming there are no tax complications, such as US citizenship, or particular tax issues raised by the ETF you are proposing.

I would go with that. Simple & straightforward.

The alternative or supplement would be a small cap ETF, global. Historically small cap stocks have outperformed large cap stocks, but there's all kinds of reasons why that might not reoccur. It's certainly the case that when any anomaly (contradiction to the theory that the best portfolio is the one which indexes against the broadest possible index) is discovered and published about, its outperformance is then reduced. This certainly happened with the "small cap effect" in the early 1990s.
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: ETFs for children's scholarship fund

Post by TedSwippet »

MrCurious wrote: Wed Aug 04, 2021 3:46 am My sister and I recently became parents at the same time.
Congratulations!

That's all I dropped by to add. :-)
Topic Author
MrCurious
Posts: 39
Joined: Mon Aug 10, 2020 9:42 am
Location: Bosnia / Croatia

Re: ETFs for children's scholarship fund

Post by MrCurious »

Thank you both!

I was initially thinking of overweighting some of the following: Small Cap, Europe, Emerging Markets, or Clean Energy.

However, at the end of the day, I still believe that the simplicity that comes from owning a single fund has a number of advantages.

Given that both my sister and I are leaning towards ESG, we might choose a slightly different fund: Vanguard ESG Global All Cap UCITS ETF.

It has a 0,02 percentage points higher cost and doesn't contain sin stocks and fossil fuels. Still, I believe that it will have a similar long-term return as FTSE All-World.
IcedTea
Posts: 92
Joined: Thu Mar 12, 2020 4:12 am

Re: ETFs for children's scholarship fund

Post by IcedTea »

The Rational Reminder podcast as an episode describing why ESG are non-optimal investments - or at least not as good as a plain world stock ETF.

The basic idea is that investors are willing to pay more because the assets are ESG regardless of underlying factors like revenue, costs, ... This leads to future lower returns.

I'd stick with all world stock.
IcedTea
Posts: 92
Joined: Thu Mar 12, 2020 4:12 am

Re: ETFs for children's scholarship fund

Post by IcedTea »

On another area, from an accounting perspective I understand why the scholarship fund should be separate from your portfolios.

If you are able to keep your accounting on a spreadsheet you should be able to lower your fees by keeping the scholarship funds as part of your general portfolio (assuming you have a 2/3 fund portfolio).
imsomeguy
Posts: 108
Joined: Tue Oct 06, 2015 9:02 pm

Re: ETFs for children's scholarship fund

Post by imsomeguy »

Why not a 529 plan? Great way to save/invest for your children's college plans.

Most 529s also have a range of investment options but maybe put $$ in the "vehicle" (aka 529 plan) and then let that help you choose the "gas type" (aka actual investment/mutual fund/wtf)
tubaleiter
Posts: 247
Joined: Tue Mar 09, 2021 11:58 am

Re: ETFs for children's scholarship fund

Post by tubaleiter »

VWRL makes perfect sense - just own everything.

Barring any tax reasons, VWRA might be just a smidge simpler, since you don't need to reinvest the dividends. Returns should be exactly the same since the hold the same assets, just one is accumulating and the other distributing. That's aside from any transaction fees on dividend reinvestment, or tax differences on dividends vs capital gains.
jg12345
Posts: 427
Joined: Fri Dec 11, 2020 12:03 pm

Re: ETFs for children's scholarship fund

Post by jg12345 »

MrCurious wrote: Wed Aug 04, 2021 3:46 am Hi guys! :happy

My sister and I recently became parents at the same time.

We were thinking of investing a part of our savings in a scholarship fund for our children.

This means that our time horizon would be roughly 18 years.

Given that this time horizon is perhaps a bit longer than for an average investor, what do you think our asset allocation should be?

My initial idea was to make it simple and invest everything in FTSE All-World UCITS ETF (VWRL), but I am open to other ideas as well :sharebeer
Congratulations!

I just wanted to add to those who said to buy the acc version that reinvest dividends, rather than the distributing one.
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: ETFs for children's scholarship fund

Post by TedSwippet »

imsomeguy wrote: Tue Aug 17, 2021 11:48 am Why not a 529 plan?
These plans are for US investors only. The topic author is not a US citizen, lives in Bosnia/Croatia, and posted in the non-US investing forum.
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