Young Investors

[larry]

Our daughter, who will be married shortly, has an IRA and Roth, both in foreign funds (Scudder) and both of which have performed well (about $8k and about 9% annulized).

When they get married (they are both still in college) and begin investing, what are some suggestions for diversification using VG. I say VG because I believe that if I can get them steered the right direction they will not fall into the friends, broker, heard it on the tv investing trap.

Already, FSIL said he was thinking of buying some WMT stock and I had to put some brakes on that and fill his head with diversification thoughts. My suggestion was to DCA about $50/mo into a diversified fund. They don't know it yet but I will be providing this boost to get their life started.

Any thoughts?

 

[JPatrick]

There are many index portfolios floating about, some being; Coffee House, Margarita, CouchPotato, to name a few.  Lots of info if you google these.
A good read is Paul Merriman's "Live it up without outliving your money."  He lays out many portfolios, some using VG exclusively.
Index portfolios are touted as the "set it and forget it" solution, but they too, need rebalancing to stay in tune with current market conditions.
Live style/target retirement funds are also a possibility.  More of a set and forget, and they have gotten much better over the past few years.

 

[Nords]

Give 'em a Bogle book, send them over to the Vanguard Diehards discussion board, let them teach themselves, and back slowly away with your hands in the air.

We can step in many times with our years of accumulated wisdom, but new investors also need to learn to do this for themselves. Wal-Mart is not such a bad stock to begin learning the risks & rewards of investing and it might actually be selling at a discount. Humberto Cruz & Charles Carlson made their ER portfolios from individual stocks and it can still be done that way. It's a lot more work but maybe it's the way they've decided to go.

They'll learn much more quickly from a $1000 loss than from anything we old pharts have to say.

 

[mickeyd]

If they have to start out small, Vanguard STAR would appear to be the best (only) fund available until it gets built up over time (a few years). After that, or now if she has enough to meet the mininum, I would recommend that she look at the Life-Cycle series of fund-of-funds. They are cost effective and give you instant diversification. As time permits she can slice and dice as she feels necessary or can ride the L-C fund all the way to the end.

 

[macdaddy]

Personally, I had more fun investing in individual stocks than in funds or indexes, which in turn encouraged me to save more (to have more to invest). Now it's either (a) go on vacation or (b) pick up 100 more shares of that company I have been watching. This might come back to burn me but I don't have more than 15% in any one company and so far so good.

 

[larry]

Give 'em a Bogle book, send them over to the Vanguard Diehards discussion board, let them teach themselves, and back slowly away with your hands in the air.

We can step in many times with our years of accumulated wisdom, but new investors also need to learn to do this for themselves.
They'll learn much more quickly from a $1000 loss than from anything we old pharts have to say.

How about my personal bible, Making the Most of Your Money by Jane Bryant Quinn?

I think you are right to back away and let them make their own mistakes, that is one of the hardest things to do for me as a parent but I agree that is probably best in this situation. What do they say about the school of hard knocks, it's where you pay for your lessons before you're even granted admission?

 

[cute fuzzy bunny]

wmt does seem cheap though. Saw the stock sign in the front of sams club yesterday...48 or something like that. Wasnt it 56 just a couple of years ago?

 

[brewer12345]

wmt does seem cheap though.  Saw the stock sign in the front of sams club yesterday...48 or something like that.  Wasnt it 56 just a couple of years ago?

Eh, hard to get excited about WMT. They have succeeded in drawing so much ire that I think they will be the target of local, state and national attacks for years to come. You should see all the brouhaha over their application for a bank charter...

 

[cute fuzzy bunny]

They seem to be doing things to try to mitigate the negative press. See any of the stuff they're doing with organics and fisheries? Not raiding the existing organic farms and the existing fisheries and wiping out the supply, but buying defunct or down on their luck businesses and rebuilding them and increasing their capacity.

All arguable stuff, to be sure, but from a PR perspective, I see a trend to heal their image.

Worlds largest retailer. Still though, its not cheap. Just hasnt gone anywhere in a while. Hard to say where the next move is towards.

 

[Nords]

wmt does seem cheap though.  Saw the stock sign in the front of sams club yesterday...48 or something like that.  Wasnt it 56 just a couple of years ago?

You should see the stock sign at Costco, if they even bother with one.

Wal-Mart & Costco started at opposite ends of the stock-price spectrum and have switched places. It'll be interesting to see what happens if the world's largest retailer starts treating its employees like Costco, and if WMT can attract board members like Charlie Munger.

 

[cute fuzzy bunny]

My old megacorp used to have a stock price sign out front. When the stock was down, they put out a bigger sign.

I'm still noodling over whether that was a good idea or not.

 

[Nords]

My old megacorp used to have a stock price sign out front.  When the stock was down, they put out a bigger sign.

I've been watching INTC's stock price for the last couple months, and that sign must be huge...

Aren't they having a fire sale? Why is everyone running away screaming?

 

[cute fuzzy bunny]

Used to drive Grove crazy. Even during the late 90's the stock was just sitting with a PE in the 30's. He used to complain "We've got the E...where the hell is the P?!?" I so wanted to tell him...

They're probably painting the stock price on the parking lot.

Certainly a very efficient manufacturer with much better new management...