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Investors - What to do?
My youngest daughter has received an inheritance of $5K. Part of the provisions for that inheritance is that she may not have access to it until she reaches 21. She's 15 now. I'd rather just not keep in in a savings account. I'm somewhat aware of the UTMA (Uniform Transfer to Minors Act), but I'm not exactly sure that's the right thing. I've just started looking into this, but I thought I'd throw this out there in case anyone has similar circumstances.
BTW, this money is NOT used for education, we've already got that covered.
BTW, this money is NOT used for education, we've already got that covered.
"The only people that tell you it can't be done are the people who haven't done it themselves."
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Exactly, that's my intention. Just not sure what kind of account. I suppose I can use a UTMA, that should work since we can buy and sell stocks, mutual funds, etc.
Yeah, that's a tough one, but in my case, I don't have a choice. That was the stipulation of the inheritance.
Wish I would have had a better understanding of it at a younger age. If I would have invested $3-5K a year from 20-30 I would not have had to worry about retirement. I do have a pension but it took a huge hit in recent years. Something I did not expect or plan for.
If your daughter is not working and earning income, I believe she is not eligible for an IRA, Roth or otherwise. There are restrictions who can and can not have an IRA.
I am not a big fan of locking money up until someone reaches retirement, although I understand many, if not most people, do not have the discipline to leave the money alone. This is a great opportunity to obtain an education and start thinking about investing.
Don't buy bonds now. You are loaning money almost for free and frankly likely at a loss as interest is not keeping pace with the cost of living.
Buy a good company like Chevron, Dupont, 3M. If Chevron goes bye-bye, having an insurance company backed security or government instrument, which you think is insured, will not matter anyway. Some folks will understand this, some will not. By the way, insurance companies have gone broke.
The above is total BS, in more ways that one. Highly rated corporate bonds are paying more than treasuries because they do not have the US government backing them.
If I read the post correctly, it is her money and it should be protected for her, not for diddling in the stock market.
1- put the money in a safe mutual fund
2- she will not pay taxes on the interest made
3- when she begins to make a salary move the funds(it may take 3 years) to a ROTH IRA
4- when she needs the money its there
yes tell her it's there , its her's, but iin the future she'll need it (or not!)
Do it now, and in the middle of Romney's second term your little girl will see that measely five grand turned into a pot of gold!
Bond yields suck! This is fact.
Banks are not paying any decent rate of interest. Besides being an oil producer, I also know something about investments as I also own a bank. This is fact.
Insurance companies have and likely will go broke. This is fact.
What do you consider to be a decent rate of interest? Of course corporate bonds are paying more than government bonds, however, the rate of interest currently being paid is not keeping up the cost of living. Bonds are not without risk. To believe they are is complete BS! High yielding corporate bond have a high yield because they are risky. Rating agencies have also come under serious scrutiny the past several years.
I personally prefer to take my chances with a solid dividend paying company, buy their stock and currently be taxed at 15%.
With current tax law, dividends are taxed at 15%. Interest on corporate bonds are taxed at ordinary income.
I have more faith in the credit worthiness with companies like Chevron or Exxon before I do the US Government. The government has been doing such a good job with the taxpayers money, if you don't believe it, just ask someone in government.
You read like a guy who sells bonds.
The OP asked for advice. I gave advice. Anyone can take it or leave. If you disagree that is fine, however, to call my post BS results in my having two words for you that are not appropriate for this forum. The second word is YOU! Can you figure out the first?
So you are willing to risk her money to make yourself feel better...I get it.
A sucker is born every minute
PT Barnum
PS..do as you please with your money, but this money belongs to his daughter.
Just in time for your Labor Day vacation, the Securities and Exchange Commission has produced a spellbinding story of what happens when normal people try to invest like Wall Street big shots.
The masterpiece in question is "Study Regarding Financial Literacy Among Investors" [PDF], which was commissioned by the watchdog agency in response to a Dodd-Frank mandate. And while a 182-page treatise on financial literacy may not seem like beach-read material, it's very likely the most darkly funny thing you'll read all year.
The basic story is that after the financial crisis, lawmakers decided that one of the reasons the economy collapsed is that average investors didn't understand the various stocks and bonds and mutual fund shares they had bought. So they decided to require the SEC to find out how much average (also known as "retail") investors knew about the stuff in their portfolios, by asking them questions like, and I'm paraphrasing: "This stock you own — what does it do?"
The resulting study, released today, is amazing and depressing. Not only does it contain the world's longest section titles ("The Most Useful and Understandable Relevant Information that Retail Investors Need to Make Informed Financial Decisions before Engaging a Financial Intermediary or Purchasing an Investment Product or Service") but it sheds light on how little people know about the financial products they own.
The SEC's conclusion is fairly straightforward: "U.S. retail investors lack basic financial literacy ... have a weak grasp of elementary financial concepts and lack critical knowledge of ways to avoid investment fraud."
More of the story and SEC report.
http://nymag.com/daily/intel/2012/08/sec-study-nobody-knows-anything.html
This.
Yeah, that's EXACTLY right. :rolleyes
I'll show her just what I'm doing with my 401K and why I'm doing it. Then we'll come up with some safe investments to make, at least with the majority of it.
If someone gave her $5,000, your duty is to give her $5,000 when she is 21. Put it in the stock market, and when the market drops 5000 points what will you tell her?
I won't tell her anything. I'll give her $5000. She can't lose, but she can gain an education. I suppose that I should have made that clear - she'll get at least $5000 when she turns 21. If we can make more and she can learn something, that's awesome. If we lose money, she learns a lesson and still starts out with $5k.