etf portfolio for a 18 year old college student
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etf portfolio for a 18 year old college student
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
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
Re: etf portfolio for a 18 year old college student
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
A TD e-series fund account with 2-3 index mutual funds, Cdn equity, US equity, fixed income. Check out Portfolio Design at finiki
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Re: etf portfolio for a 18 year old college student
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:
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.
- 25% domestic stocks
- 25% international stocks
- 25% domestic nominal bonds
- 25% domestic inflation-indexed bonds
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.
Variable Percentage Withdrawal (finiki.org/wiki/VPW) | One-Fund Portfolio (VBAL in all accounts)
Re: etf portfolio for a 18 year old college student
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.
Re: etf portfolio for a 18 year old college student
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.
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Re: etf portfolio for a 18 year old college student
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).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.
The older boy is far more cautious and has been using HISA for his earnings.
Re: etf portfolio for a 18 year old college student
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?
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Re: etf portfolio for a 18 year old college student
What does he think? At 18 I thought it would be nice to have money to spend on things I couldn't afford.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 .
"And the days that I keep my gratitude higher than my expectations, well, I have really good days" RW Hubbard
Re: etf portfolio for a 18 year old college student
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.
Re: etf portfolio for a 18 year old college student
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...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.
Who will be responsible if it does not turn out well?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 ;:)
P.S. My posts have really been targeted to the OP who seems to have gone AWOL.
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Re: etf portfolio for a 18 year old college student
Hello, I haven't gone awol .i wish I could sometimes. Lol
I am sincerely thankful for all the responses.
I am sincerely thankful for all the responses.
Re: etf portfolio for a 18 year old college student
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.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.
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".