Need suggestions for my son

[Tiger]

My son , age 33, has finally decided it's time to start saving towards his retirement. Normally I would have advised him to ope a Vanguard account but the problem is that he has only $600 to begin with and that doesn't meet Vanguard's minimums. I know he can invest with Schwab & AARP but I was wondering if anyone else has any suggestions.

 

[Martha]

A gift to bring him to the minimum?

If you have fairly hefty accounts yourself, you might be able to have your son keep his account at the same place with the provider waiving the minimums.

 

[travelover]

I believe PAX World has a $250 minimum and is not a bad investment, per Consumers Reports. It is socially screened.

Pax World Balanced Fund: Main Page

 

[ats5g]

Start w/ Vanguard's STAR fund. It has a 1,000 minimum. Not only is it cheap, but it's instant diversification. Fyi, just remember to get him to sign up for e-delivery to eliminate virtually all the account fees.

- Alec

 

[brewer12345]

Schwab wants $1000 to open an account, but will waive the minimum if you establish a regualr monthly deposit of at least $100 via direct deposit. The markettrack balanced fund (SWBGX) is a good starter investment and only has a $100 minimum starting investment. Since Schwab has done away with small account nuisance fees, this would be a pretty cheap way to get started.

 

[cute fuzzy bunny]

I agree with alec...good fund with good diversification, although its all managed funds. If you have voyager or flagship service with vanguard, they'll extend the same fee structure to your family members...so he wont have to pay extra.

Another option is to open a brokerage account and buy ETF's or use one of the 'sharebuilder' type programs.

Check this
Cheap Mutual Funds | Low Minimum Mutual Funds

 

[chinaco]

I believe he can open a Vanguard Roth IRA account and contribute a weekly (or monthly) amount ($50... or so). THis allows people to open an account with less than the minimum... but has to meet the minimum within a certain period (1 year).

I am not sure if you can do that with a taxable account... need to check.

 

[TromboneAl]

If you are a Vanguard flagship customer (> $1 Million) all family members get flagship amenities including no minimum balances.

Also, sometimes if you sign up for automatic investments, the minimums are lower.

 

[Goonie]

I believe he can open a Vanguard Roth IRA account and contribute a weekly (or monthly) amount ($50... or so). THis allows people to open an account with less than the minimum...

T. Rowe-Price is the same way with Roth & regular IRA's. As long as you setup automatic transfers of at least once per month from your bank account, there is no minimum balance to start, and a $50 minimum auto-transfer.

 

[NinjaPigeon]

I'm going to go ahead and disagree with everyone above me in the thread. Given that I am only about 3 years ahead of your son (in the learning curve, not age), and the millionaires above me are a good 20, you pick what advice you want to go with

When I started, the ideas of stocks and mutual funds scared me. There is a bit of a learning curve and it is intimidating. More important than knowing WHERE to invest is knowing HOW to save. Get your son into a habit of putting away $X every month for now into a decent online savings account (ING is very newbie friendly). If he does this successfully for six months or so, he'll have a couple grand to meet the minimums on a brokerage account.

But if you rush him into a brokerage account before he's learned to LBYM, then all you've given him is a tax bill at the end of the year when he sells because he wasn't ready to live the lifestyle.

Personally, I started with ING. My brother introduced me to the idea and the first book I read was "The Wealthy Barber". After about 3 months of the ING thing, and seeing the balance and interest increasing each month, I started a 401k. Did that for a few months and I was hooked. I wanted to try mutual funds but was pretty worried about taxes. Lucky for me I found out about index funds and decided to throw the minimum at one. After a few more months I was into several more and now have a decent allocation strategy.

 

[NinjaPigeon]

A gift to bring him to the minimum?

I also strongly disagree with this. LBYM and investing is something you have to learn by doing.

My account grew by tiny amounts at the beginning. But the more I saved, the faster it grew. Once you can see that the whole "pay yourself first" concept Really works, it becomes addictive. Once the lightbulb comes on, he'll be a convert.

 

[old woman]

My first investments outside a CD IRA was buying shares in the electric company. Then I ventured into Janus fund in a taxable account at $75 down and $75 a month it was painless because even if I lost 20% when I had only $150 invested it wouldn't have killed me, gave me a chance to learn my risk tolerance. I kept it up until I had about $2K i lost money but it was probably good for me and I had $2K more than if I didn't do it. Now I have $410K invested in mutual funds and stocks and have seen good times and bad.

 

[Tiger]

thanks for all of the suggestions. I think I will have him buy AARP funds and then when he has $1000 to swith to Vanguard Star.

I don't want to lend him money because he won't be doing it on his own.