Investment Choice for 24 Yr old Son

[Danny]

I have a son out on his own and with about 3-4 thousand to invest.
I got him setup at Scottrade last night.

But the problem for me is that he expects me to give him advice on where to put it.
He mistakenly believes I'm an investment genius because I retired early because of my stock trading. I'm in a different place now where my mindset is getting more conservative - I sometimes pick a stock and trade it in ranges (I don't want him to do as I do! at least not until he gets 10-30 yrs of experience ) and I'm frankly worried about the economy and the world in general (bird-flu, oil, conflicts, etc.) and its effect on the markets.

As always, when in doubt - I come to the forum.

He wants to make more than Money Market/CD/Treasury returns (Mostly where I'm at now) - What is your collective advice?

Of course, whatever you tell me I will pick the best advice and claim it as my own.
A Father has to do what he has to do to retain a certain level of respect from his kids.
DanTien

 

[cute fuzzy bunny]

Target Retirement 2045.

Then forget about it, except to add to it as often as possible.

 

[JPatrick]

A set and forget ETF== PRF (follows RAFI 1000)
A play on the future ETF== PHO (water)
Oil service ETF==PXJ
Tech stock==PWAV
Energy of the future?==DESC

Maybe a good time to also talk about timing.  Averages up a bunch last 90 days.  Who knows, today could be a short term high for awhile??

 

[Cool Dood]

Target Retirement 2045.

Then forget about it, except to add to it as often as possible.

Christ, man, you make me laugh so hard! And with things that are true and simply put... With just about every post, too.. and I have no idea how you keep up with all 300 threads you concurrently post in....

 

[HFWR]

th, you using that proxy server again?

 

[TromboneAl]

I'd go with CFB if the money is for retirement. But if it's for buying a house in 2 years or for starting a business, that's different.

 

[Cool Dood]

He wants to make more than Money Market/CD/Treasury returns (Mostly where I'm at now) - What is your collective advice?

I'm the same age, and I can say that if he's like me then he should probably have fun at first and just buy stocks that interest him for whatever reason, to have fun and learn a little, but in the end it doesn't really matter since as CFB said it's just a matter of having a bunch of money lying around in things that grow, and letting it go for a few decades. Any of the things that others have suggested or that you could suggest would work about the same, index, ETF, (diversified) basket of stocks, etc.

Still, we all need a chance to be a power stock-jockey when we're young

 

[cute fuzzy bunny]

No sir. I even turned off my virus scanner this morning to live the wild life.

Cool Dood...wait until you get my bill.

I wont even go into all the stuff I got done so far today along with posting. It'd make you cry.

Al is eminently correct though...I should have asked for the purpose of the investment first. If he's going to use the money pretty soon, a high equity component might not be the best place. I just assumed long term retirement as a goal.

 

[Cool Dood]

th, you using that proxy server again?

Well, that missing apostrophe before "n'" is really pissing me off.................

 

[cute fuzzy bunny]

Is that better?

 

[Cool Dood]

Yes, it'll do, although now you sound like an urbanite with a hairy posterior.......

 

[cute fuzzy bunny]

I live in the country.

And lets leave my hairy ass out of this

 

[brewer12345]

Dan, you want suggestions that will teach him about investements, or just fire & forget type stuff? If the money is not earmarked for anything in the near future (5 years) and he understands that reaching for return also entails taking risk, I would suggest that he pick two or three individual stocks and research them thoroughly, but 1 or 2, and then follow them to see how his research turned out. I can offer up some ideas for that one if you like.

If its about where to put long term money for a yungun, CFB's suggestion isn't a bad idea.

 

[HFWR]

I live in the country.

And lets leave my hairy ass out of this

Your a$$ had to come into it sometime...

Always does!!

 

[cute fuzzy bunny]

Its been a while, but whoop, there it is...

 

[Sisyphus]

Wow... talk about threadjacked!

If your son is interested in learning, I would consider starting him with a few books (Four Pillars is always a winner, among others) and let him make his own decisions from there. I would urge him to consider index funds or ETFs, but that's probably because it's what I'm most familiar with.

If we wants to play with stocks, fine, but it should be clear that doing that without educating yourself A LOT is about as risky as hitting the nearest casino. The good news is that it's not a ton of money. I would hope he sees this as a great learning experience for him though, and the start of a solid portfolio.

 

[Danny]

Wow... talk about threadjacked!

If your son is interested in learning, I would consider starting him with a few books (Four Pillars is always a winner, among others) and let him make his own decisions from there. I would urge him to consider index funds or ETFs, but that's probably because it's what I'm most familiar with.

If we wants to play with stocks, fine, but it should be clear that doing that without educating yourself A LOT is about as risky as hitting the nearest casino. The good news is that it's not a ton of money. I would hope he sees this as a great learning experience for him though, and the start of a solid portfolio.

Thanks Sisyphus for getting us back - the Jennifers and their hormones are a force of nature

At this point he hasn't shown an interest in investment theory/research not a numbers detail guy. I'll be giving him The Pillars and Intelligent Investor for his birthday - see what comes of that...I want to ease him in, get his feet wet not encourage active trading.

Target Retirement 2045.

Then forget about it, except to add to it as often as possible.

A set and forget ETF== PRF (follows RAFI 1000)
A play on the future ETF== PHO (water)
Oil service ETF==PXJ
Tech stock==PWAV
Energy of the future?==DESC

Maybe a good time to also talk about timing. Averages up a bunch last 90 days. Who knows, today could be a short term high for awhile??

Dan, you want suggestions that will teach him about investements, or just fire & forget type stuff? If the money is not earmarked for anything in the near future (5 years) and he understands that reaching for return also entails taking risk, I would suggest that he pick two or three individual stocks and research them thoroughly, but 1 or 2, and then follow them to see how his research turned out. I can offer up some ideas for that one if you like.

If its about where to put long term money for a yungun, CFB's suggestion isn't a bad idea.

I'd go with CFB if the money is for retirement. But if it's for buying a house in 2 years or for starting a business, that's different.

Thank you guys.

I'm liking the idea of the target 2045 fund - think at this point a forget-about-it-spread-the-risk basket approach would be a good intro for him - but letting the money sit in the money market fund for awhile to see what this market/economy is doing.

 

[Dude]

If he's got a job with a 401(k) and can invest in an IRA (Roth preferably), I recommend the Financial Engines service.....will teach him about investment risk and probability of meeting his retirement goals and help him set up a plan.....you can buy a 3 month subscription for around $40 I think.....check it out:

www.financialengines.com

 

[Dude]

P.S. - if you have an account at Vanguard over $100k you should have access for free.....

 

[Dude]

For instance if his goal is to have a retirement income of say $50k/year (in today's dollars) starting at age 65 (or whatever) and he wants to have a 90% chance (he selects this) of meeting that goal, the service will tell him how much he should contribute to retirement accounts each year and will give advice on a portfolio of funds to meet the goal, depending on the short-term risk he is comfortable taking (i.e. how much his accounts could decline in the next 12 months).  Once you set up your accounts it's easy to play around with changing contribution and risk levels, retirement age, etc. and see how it affects the results.  I think it's a good tool, especially for someone just starting out.

 

[Danny]

For instance if his goal is to have a retirement income of say $50k/year (in today's dollars) starting at age 65 (or whatever) and he wants to have a 90% chance (he selects this) of meeting that goal, the service will tell him how much he should contribute to retirement accounts each year and will give advice on a portfolio of funds to meet the goal, depending on the short-term risk he is comfortable taking (i.e. how much his accounts could decline in the next 12 months). Once you set up your accounts it's easy to play around with changing contribution and risk levels, retirement age, etc. and see how it affects the results. I think it's a good tool, especially for someone just starting out.

Thanks Dude, I'll check it out.
He started a 401k a few months ago and has it in a stable value fund, which I find reassuring. I wish there was a stable value fund outside a 401k I could find right now - not exciting but stable

 

[cute fuzzy bunny]

Dan...unless you're a "sky is about to fall" type, a guy in his mid-20's should be nowhere near a money market or stable value fund.

You might do well waiting for "the correction" or "the right price". You might also find yourself "down" 20% to the market.

He's going to be invested for 20+ years. Get in there and let the job do itself!

 

[Danny]

Dan...unless you're a "sky is about to fall" type, a guy in his mid-20's should be nowhere near a money market or stable value fund.

You might do well waiting for "the correction" or "the right price". You might also find yourself "down" 20% to the market.

He's going to be invested for 20+ years. Get in there and let the job do itself!

I know what your saying, I appreciate your well thought out philosophy. I've been wrong before.
I'm convinced that Ben Graham would find this market risky and overvalued - would consider now to be a bad entry point.
The reason I was glad to see him choose the stable value fund on his own, was it showed that he was careful that he didn't have this pie in the sky I want to get rich quick mentality

 

[cute fuzzy bunny]

What valuation methods are you looking at?

I've had talking heads screaming at me with every sort of pie, line and bar chart saying the market is at worst, fairly valued, and perhaps undervalued.

After being bearish for most of the last 6 years, i'm finally bullish. Some sectors look really expensive. Instead of worrying about that, buy them all and forget about it!

Share with me which tools/methods/charts/ you're getting these negative/expensive feelings from. Maybe I'm just hearing the sunny side...

 

[brewer12345]

What valuation methods are you looking at?

I've had talking heads screaming at me with every sort of pie, line and bar chart saying the market is at worst, fairly valued, and perhaps undervalued.

After being bearish for most of the last 6 years, i'm finally bullish.  Some sectors look really expensive.  Instead of worrying about that, buy them all and forget about it!

Share with me which tools/methods/charts/ you're getting these negative/expensive feelings from.  Maybe I'm just hearing the sunny side...

Pssst... yield curve inversion, for starters.