Investing for grandkids

[chrisaukcam]

Had the thought that it would make sense to buy the grandkids some I bonds for Christmas. After going thru the hassle of setting up the account, I did a check on the current payout - nothing. Now if interest rates go up the return will go up, but geeze.

So it got me thinking about DRIPS and such. Stocks would give a better return anyway. Anyone find an economical way to invest in small value purchases for kids and grandkids? I did some checking online and most places had some sort of set up fee.

 

[jerome len]

If you think your grandkids will go to collegee and you want to invest a little each year, I'd look into low cost 529 college funds. You can buy them age based, starting out primarily in stocks and then transitioning to bonds and cash as they near college age. I've done this and my grandkids and I enjoy watching them grow each year.

Whatever you do, I'm sure the kids will appreciate it.

 

[ERD50]

What about a target retirement fund, with the 'retirement' date the year they will start college?

That gives you a blend of EQ/fixed, and low expenses. Remember that money in the kids name will affect their ability to get aid, but that's hard to predict many years out.

Are these very young children? Are we looking 18 years out, or just a few?

-ERD50

 

[Bikerdude]

If you think your grandkids will go to collegee and you want to invest a little each year, I'd look into low cost 529 college funds. You can buy them age based, starting out primarily in stocks and then transitioning to bonds and cash as they near college age. I've done this and my grandkids and I enjoy watching them grow each year.

Whatever you do, I'm sure the kids will appreciate it.

+1. I have 529's for both of my Grand-kids. In addition, in my State I get to deduct the yearly amount invested from my taxable income. And if they don't go to College I get a new car.

 

[kaneohe]

Have you looked at Sharebuilder? http://www.sharebuilder.com/
You can do small purchases of certain no fee funds for 0. Looks like
automatic periodic investments of stocks $4.

 

[grumpy]

Check out

https://www.buyandhold.com

minimal costs to invest small amounts and free reinvestment of dividends. I've used this brokerage for 8 years.

 

[LOL!]

I would not bother with DRIPs in the sense that they are supposed to be low-cost way to invest. They made sense in the 1950's and 1960's, but not nowadays.

There is really no reason to use sharebuilder nor buyandhold which may have made sense in the 1980's, but not nowadays.

Many brokers have low-minimum, no-fee accounts nowadays: Schwab, TDAmeritrade, Fidelity come to mind. They all have free re-investment of dividends, too.

The 529 plan is a better option as there are no tax returns to mess with during the accumulation stage.

And instead of stocks, please think about using ETFs. Also let the parents know because of tax consequences. That's why 529 plans are great: no tax returns to fill out and you can be owner with child as beneficiary.

 

[Animorph]

Fidelity still has a $2500 minimum, which is not too practical. E*Trade is $500 minimum and has some commision-free ETF's. Those are the ones I'm familiar with.

 

[LOL!]

Funny, but my daughter has a Fidelity account with less than $3 in it. Also she started an IRA there with less than $500.

 

[MichaelB]

Investing for the grandchildren is a nice idea. I like ERD's suggestion of a target fund. Mostly stock now, disciplined rebalancing, low expenses. 529 accounts are another option, depending on the state.

 

[JPatrick]

If you want some serious safety, I-Bonds are not a bad way to go. The bonds we bought 10-12 years ago have been a great fee free, risk free investment. Even these days they can pay off well. In October 2011, a number of us (forum members) bought fresh new I=Bonds and as of their one year birthday they have paid 3.3%. They are now at 2.2% and in 6 months will pay 1.7%. Not bad for safety, but as you say, the fixed rate is zero for life. Maybe an investment to wait on for a while.
DRIPS can be fine, but if you are investing small amounts you likely will be limited to only one stock.
I have several drip stocks and I have never paid a dime for the service. When I sell there will be a small fee. It can be done with COP,EMR, DUK, SE, and PSX--all high div payers. Automatic monthly investments can be set up.

As mentioned already, ETF's can also be good. There is no commission at FIDO if you buy from their list. I've bought as few as 10 shares at a time. (dirty market timer)
One of my favorite there is DVY, which is a basket of high yield stocks.

Choices, so many choices..