etf portfolio for a 18 year old college student

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
Post Reply
Lovethesport
Newcomer
Newcomer
Posts: 6
Joined: 28 Jul 2017 08:22

etf portfolio for a 18 year old college student

Post by Lovethesport » 04 Aug 2017 18:03

hello, i am posting this for my son. he is turning 18 in november and i think he should start investing . please advise etf's and asset allocation. i am presuming he will withdraw in about 6-8 years for a house purchase. ( hopefully not for a gold digger ;:)

Emergency funds: Three to six months of expenses (living with parents and going to college for next 2 years. after that living with parents and working about 50,000k per annum)
Debt: Indicate if you have any debt (none).
Marital Status: (Single)
Tax Rate: 9 Federal, 10% Provincial
Provincial Residence:ontario
Age (a range would suffice): turning 18 in novemeber
Desired Asset Allocation: 50 stocks / 50 bonds (really unsure)
Desired Stock Allocation outside Canada:unsure

currently have $ 7500 to invest and will add most of part time income to this aswell.

thank you very much

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 18079
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: etf portfolio for a 18 year old college student

Post by AltaRed » 04 Aug 2017 18:13

If he is going to likely withdraw in 6-8 years, a 50/50 allocation is rolling the dice in terms of potential volatility. That said, you asked.....

A TD e-series fund account with 2-3 index mutual funds, Cdn equity, US equity, fixed income. Check out Portfolio Design at finiki
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

longinvest
Gold Ring
Gold Ring
Posts: 1374
Joined: 10 Sep 2012 17:26
Location: QC

Re: etf portfolio for a 18 year old college student

Post by longinvest » 04 Aug 2017 18:44

I'm not making a recommendation. But, if I could go back in time, I would have adopted my Lifelong portfolio starting with the very first money I have invested. It's a 50/50 portfolio composed of four total-market index ETFs:
  • 25% domestic stocks
  • 25% international stocks
  • 25% domestic nominal bonds
  • 25% domestic inflation-indexed bonds
It's a portfolio, so it's expected to fluctuate in value up and down. Markets don't care about me; they might fluctuate down just when I need to take money out. But, that's part of investing.

The portfolio's future returns are uncertain, but so are my future financial needs. The wide diversification across four markets, including a 50% allocation to securities which promise precise payments on precise future dates (bonds, half of which with payments indexed to the Consumer Price Index), keep this portfolio's behavior relatively smooth. It works for me.

I intend to keep using this portfolio all lifelong.

I use cash investments (high-interest savings account) for money I expect to spend within the upcoming few months. I do not hold any additional cash, not even for bigger expenses expected within a year or two.

I would put any money in priority into a TFSA, because it shelters the growth from taxes and has a flexible withdrawal policy.
Bogleheads investment philosophy | Simple index portfolios | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VAB/ZRR

User avatar
Mordko
Silver Ring
Silver Ring
Posts: 126
Joined: 24 Jan 2016 09:26

Re: etf portfolio for a 18 year old college student

Post by Mordko » 05 Aug 2017 20:37

My younger son was in this position this year. He maxed out his TFSA and allocated the funds as following: 30% XIC, 70% XAW. Nice and simple and means he gets a feel for ups and downs of the market early.

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 18079
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: etf portfolio for a 18 year old college student

Post by AltaRed » 05 Aug 2017 21:31

Mordko wrote:
05 Aug 2017 20:37
My younger son was in this position this year. He maxed out his TFSA and allocated the funds as following: 30% XIC, 70% XAW. Nice and simple and means he gets a feel for ups and downs of the market early.
No planned withdrawal 6-8 years from now? Willing to wait out the market if it is bear territory at that time? The issue is the importance, or not, of having the capital in a relatively short period of time. If it does not matter, then full equity may be the way to get the roller coaster experience early in life.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

User avatar
Mordko
Silver Ring
Silver Ring
Posts: 126
Joined: 24 Jan 2016 09:26

Re: etf portfolio for a 18 year old college student

Post by Mordko » 05 Aug 2017 21:51

AltaRed wrote:
05 Aug 2017 21:31

No planned withdrawal 6-8 years from now? Willing to wait out the market if it is bear territory at that time? The issue is the importance, or not, of having the capital in a relatively short period of time. If it does not matter, then full equity may be the way to get the roller coaster experience early in life.
Don't know the future but this is training money from RESP withdrawal. $5.5K (probably $6K now) isnt going to change anything. We'll back him up if required but to be honest the money seems to be sticking to him anyway. He has been finding ways to earn respectable $s since the kid was 12 - and it hasn't stopped now that he is at university (although the costs obviously exceed his income).

The older boy is far more cautious and has been using HISA for his earnings.

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 18079
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: etf portfolio for a 18 year old college student

Post by AltaRed » 06 Aug 2017 10:04

Yeah, but this thread is not about your kid. In response to the OP, should that porfolio be 100% equity if the kid is going to access the money in 6-8 years?
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

User avatar
deaddog
Gold Ring
Gold Ring
Posts: 2549
Joined: 19 Jan 2008 19:59
Location: Central BC/Arizona

Re: etf portfolio for a 18 year old college student

Post by deaddog » 06 Aug 2017 10:42

Lovethesport wrote:
04 Aug 2017 18:03
hello, i am posting this for my son. he is turning 18 in november and i think he should start investing .
What does he think? At 18 I thought it would be nice to have money to spend on things I couldn't afford.
Most of our so-called reasoning consists of finding arguments for going on believing as we already do.( J.H. Robinson)

User avatar
Mordko
Silver Ring
Silver Ring
Posts: 126
Joined: 24 Jan 2016 09:26

Re: etf portfolio for a 18 year old college student

Post by Mordko » 06 Aug 2017 12:01

AltaRed wrote:
06 Aug 2017 10:04
Yeah, but this thread is not about your kid. In response to the OP, should that porfolio be 100% equity if the kid is going to access the money in 6-8 years?
The answer depends on circumstances, amount of money and personality. I can't advise but in the right circumstances for the right type of person it can be excellent experience. Not to mention that the probability of losing money over that period of time is far, far less than 0.5. Of course even if it's a 20% chance, it can happen and a loss will hurt. On the other hand losing a bit of cash isn't that much of an actual tragedy for a young person; most of his worth isn't in the bank account but in skills and the earning power.

In other words, there is nothing inherently wrong with going 100% stocks for an 18 year old.

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 18079
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: etf portfolio for a 18 year old college student

Post by AltaRed » 06 Aug 2017 12:35

Mordko wrote:
06 Aug 2017 12:01
The answer depends on circumstances, amount of money and personality. I can't advise but in the right circumstances for the right type of person it can be excellent experience. Not to mention that the probability of losing money over that period of time is far, far less than 0.5. Of course even if it's a 20% chance, it can happen and a loss will hurt. On the other hand losing a bit of cash isn't that much of an actual tragedy for a young person; most of his worth isn't in the bank account but in skills and the earning power.

In other words, there is nothing inherently wrong with going 100% stocks for an 18 year old.
I can agree wholeheartedly IF it is indeed the kid who is doing the decision making and the learning. But ISTM that it is not the kid making that decision...
hello, i am posting this for my son. he is turning 18 in november and i think he should start investing . please advise etf's and asset allocation. i am presuming he will withdraw in about 6-8 years for a house purchase. ( hopefully not for a gold digger ;:)
Who will be responsible if it does not turn out well?

P.S. My posts have really been targeted to the OP who seems to have gone AWOL.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

Lovethesport
Newcomer
Newcomer
Posts: 6
Joined: 28 Jul 2017 08:22

Re: etf portfolio for a 18 year old college student

Post by Lovethesport » 06 Aug 2017 15:16

Hello, I haven't gone awol .i wish I could sometimes. Lol

I am sincerely thankful for all the responses.

User avatar
Mordko
Silver Ring
Silver Ring
Posts: 126
Joined: 24 Jan 2016 09:26

Re: etf portfolio for a 18 year old college student

Post by Mordko » 06 Aug 2017 16:00

Lovethesport wrote:
06 Aug 2017 15:16
Hello, I haven't gone awol .i wish I could sometimes. Lol

I am sincerely thankful for all the responses.
One thing... If the decision is taken to proceed then its important the kid reads at least some basic theory to understand what's going on. Otherwise he will learn very little, treat it like a lottery and the money will be wasted.

Finiki has a nice list of references. Something like "The Value of Simple" is great for a beginner in Canada. I would also strongly recommend something on psychology, .e.g Zweig's "Your Money and Your Brain".

Post Reply