Mutual fund or savings account?

[riverwed070707]

I have $1,100 in an account for my DD that is just sitting there earning 1%. I'm waiting on an inheritance that I also plan to put in her account which will bring the total up around I've toyed with the idea of putting it in a mutual fund to give it some actual growth potential (it will be a while before we start making regular contributions to it) but I feel so clueless on how to get started with them.

DHs retirement is with Fidelity so it would be easy to set something up through them but I don't know where to start with choosing one. Any tips for a beginner?

ETA: FWIW, she's 3 and this money won't be used for at least 15 years.

[bjl584]

I'd probably go high risk with some high dividend yield with a 15yr time line, but that isn't for everyone. When I first started I sat down and talked to an advisor that recommended a few funds to me. There are thousands of them, and it will make your head spin trying to figure them all out. I'd probably start by looking at ones that have low expense ratios and that have been around awhile. That way you can look at their history and see how they've performed over the past 10 to 15 years. Pick a few with solid track records and low expenses. Fidelity has tons of resources for you to study the different funds.

[Petunia 100]

I have $1,100 in an account for my DD that is just sitting there earning 1%. I'm waiting on an inheritance that I also plan to put in her account which will bring the total up around I've toyed with the idea of putting it in a mutual fund to give it some actual growth potential (it will be a while before we start making regular contributions to it) but I feel so clueless on how to get started with them.

DHs retirement is with Fidelity so it would be easy to set something up through them but I don't know where to start with choosing one. Any tips for a beginner?

ETA: FWIW, she's 3 and this money won't be used for at least 15 years.

Unless I am mistaken, you need at least $2500 to open an account for DD at Fidelity.

At Vanguard, you can open an account with $1000 if you choose either the STAR fund or a Target Retirement fund.

At T. Rowe Price, you can open an account with $1,000 in any of their funds.

I would definately invest the money for her. She has at least 15 years for the money to grow.

[MonkeyMama]

If you don't need it for 15 years, definitely invest the money.

I personally put my kids money in VG Star ($1k minimum) and moved it over to a "Retirement Target Date" fund when it got to $3k. These days you can do a target date fund with $1k minumum, I believe (at VG).

Of course, on the conservative side, a balanced fund like VG Star is a good place to start. Target date funds can be a little more aggressive, but very simple. (Aggressiveness depends on target date). There are several different type target date funds (not all of them are labeled "Retirement") but I don't remember off the top of my head why I went with the retirement ones. Was lower cost, better underlying funds - some reason or another... As college age approaches, I will shift to much more conservative holdings.

Anyway, I went for simple and low cost. Extra so, since I was trying to prove a point to gifter that their investment broker fees and holdings were insane. I felt an extra responsibility to be a good steward because the money is not mine and not for me. I tend to take a little more risk with my own money. Anyway, if you have no idea what to do, balanced funds and target date/life cycle funds are a good place to start. You just need to decide what kind of stock/bond mix you are comfortable with.

I do have an old 401k at Fidelity and chose to keep some money there. BUT, I am less impressed with their fund offerings over time. I'd really recommend opening an account at Vanguard - the $1k minumum on some of their funds is also pretty enticing. T Rowe also has very good funds and low minimums, but Vanguard is simply cheaper.

[jadet]

I have $1,100 in an account for my DD that is just sitting there earning 1%. I'm waiting on an inheritance that I also plan to put in her account which will bring the total up around I've toyed with the idea of putting it in a mutual fund to give it some actual growth potential (it will be a while before we start making regular contributions to it) but I feel so clueless on how to get started with them.

DHs retirement is with Fidelity so it would be easy to set something up through them but I don't know where to start with choosing one. Any tips for a beginner?

ETA: FWIW, she's 3 and this money won't be used for at least 15 years.

I'd go with the mutual fund though if you want safer means with higher than 1% earning you can consult a financial adviser about it. A good reputable one who does not work strictly to sell you the most high commissioned products.

[cooliemae]

I would look into the the 529 options for your state or even others depending whether your state offers any incentives. Some of the 529 plans allow for tax deductions for contributions and you may have access to low cost funds from the likes of vanguard and such.

[riverwed070707]

If you don't need it for 15 years, definitely invest the money.

I personally put my kids money in VG Star ($1k minimum) and moved it over to a "Retirement Target Date" fund when it got to $3k. These days you can do a target date fund with $1k minumum, I believe (at VG).

Of course, on the conservative side, a balanced fund like VG Star is a good place to start. Target date funds can be a little more aggressive, but very simple. (Aggressiveness depends on target date). There are several different type target date funds (not all of them are labeled "Retirement") but I don't remember off the top of my head why I went with the retirement ones. Was lower cost, better underlying funds - some reason or another... As college age approaches, I will shift to much more conservative holdings.

Anyway, I went for simple and low cost. Extra so, since I was trying to prove a point to gifter that their investment broker fees and holdings were insane. I felt an extra responsibility to be a good steward because the money is not mine and not for me. I tend to take a little more risk with my own money. Anyway, if you have no idea what to do, balanced funds and target date/life cycle funds are a good place to start. You just need to decide what kind of stock/bond mix you are comfortable with.

I do have an old 401k at Fidelity and chose to keep some money there. BUT, I am less impressed with their fund offerings over time. I'd really recommend opening an account at Vanguard - the $1k minumum on some of their funds is also pretty enticing. T Rowe also has very good funds and low minimums, but Vanguard is simply cheaper.

So to be clear... the retirement funds don't actually have to be saved til retirement? They can be moved/withdrawn at anytime?

[Petunia 100]

So to be clear... the retirement funds don't actually have to be saved til retirement? They can be moved/withdrawn at anytime?

"Target Retirement Fund" is just the name of the fund. Usually they are bought inside of a retirement account (such as an IRA). They can be purchased inside of an UGMA (custodial account for a minor), a 529, or a taxable account.

[Petunia 100]

I would look into the the 529 options for your state or even others depending whether your state offers any incentives. Some of the 529 plans allow for tax deductions for contributions and you may have access to low cost funds from the likes of vanguard and such.

Some states may allow you to deduct your contributions for state income tax purposes. There is no federal deduction for 529 plans for federal income tax purposes.

[snafu]

I believe you are the best steward of your money and your young daughter's monies. It's important to start learning about investments and opportunities to 'grow' your money over the long term.

If you can get to the library after the holidays, look at Kipplinger or Money Magazines. There are a great many, easy read books about investments often mentioned at SA. Wealthy Barber, books by Suzie Orman, The Richest Man In Babylon all cheap on-line or at your library. They will confirm what you already know and give you confidence to carry out your plan.

[Kooshiball]

I wouldn't put money in anywhere without financial education first (In my opinion, both mutual fund and saving are terrible investment). Even with good asset that has great potential of growth, if people don't know what they are doing, they will lose all the money. If I were you, I will put the money in educating myself. The more you get education, the more you will be able to see where you should put the money not because you feel like mutual fund is good investment but you will be sure that this particular investment will make sense in this economic condition.

That's my two cents.