Suitable AA for student investor

[travel2020]

Our college student has been saving and recently opened up a Vanguard brokerage account so the money can be invested.

Given the long time horizon, would it be best to invest it all in something like VTI or should there be some bond exposure?

Thanks for your insights.

[terran]

All stock would probably work out quite well as long as they can stomach it. If they had any earned income they may want to put it in a Roth IRA.

[celerystalks]

Provide your college student all of the good references, jl collins, intelligent investor, securities analysis, etc. and then let them make own choice. And, don’t try to influence their decision either.

[travel2020]

Thanks for the suggestions. Working on the education aspects but slow going as investing just isn’t as top of mind as other things for a college student. I’m happy about a good savings habit though and hopefully good investment decision making will follow.

[seattlecyclone]

All VTI is a very fine choice. I remember at that age I was experimenting with individual stock picking. I wasn't terrible at it, but am glad I got that out of my system when I was young and the amounts in question were pretty small.

[MustacheAndaHalf]

Can I strongly recommend 5% bonds, like with BND (Vanguard Total Bond ETF)?

It won't change a student's performance much, but it will introduce the concept of rebalancing.  Each year, some effort will be needed to bring that BND investment back to 5%.  Typically new investments are enough, but it might mean selling VIT to buy BND.

The key thing is when someone approaches retirement, if they're never rebalanced... how do they start?  Decades of never holding bonds, and never selling VTI... it's not going to be easy.  If, instead, they've been rebalancing into 5% bonds for decades, it's much easier to start changing the bond percentage upwards as retirement arrives.  The 5% bonds is mostly for good behavior later.

[DalioGold10]

Our college student has been saving and recently opened up a Vanguard brokerage account so the money can be invested.

Given the long time horizon, would it be best to invest it all in something like VTI or should there be some bond exposure?

Thanks for your insights.

I would go 100% with a globally diversified equity index.
Do not bother with picking individual stocks at you stage if you do not have the time and passion to do all the through research and risk management required.
I assume you will keep investing DCA when more money is available.

Over the long investment horizon this is the best risk/reward option.

[vand]

If we are talking about a passively managed portfolio with a 50yr+ time horizon, then I'm going to side with those advocating 100% global stock exposure. This is what I'm doing for my 2yr.

I think there are plenty of other portfolios that will beat this portfolio over the next 10-20 years, but not over much longer time periods.

If you want a slightly smoother ride, 90% global equities, 10% gold. I simply can't make a good case for holding any Treasuries in a portfolio with a 50yr time horizon at their current yields. Even if they can help soften the downside of a short term selloff, at ~1.3% yield on the 30yr note their upside is incredibly limited and will simply act as a drag on overall performance.

An important question is whether you will want to hedge the currency risk.

[BicycleB]

Can I strongly recommend 5% bonds, like with BND (Vanguard Total Bond ETF)?

It won't change a student's performance much, but it will introduce the concept of rebalancing.  Each year, some effort will be needed to bring that BND investment back to 5%.  Typically new investments are enough, but it might mean selling VIT to buy BND.

The key thing is when someone approaches retirement, if they're never rebalanced... how do they start?  Decades of never holding bonds, and never selling VTI... it's not going to be easy.  If, instead, they've been rebalancing into 5% bonds for decades, it's much easier to start changing the bond percentage upwards as retirement arrives.  The 5% bonds is mostly for good behavior later.

What a great idea!