You're a kid and have 40k. Where do you put it NOW.

[moosejaw]

My son has 40k to invest.  He is 8.  What fund/funds do you put it in?

I'm likely going to open a Vanguard account.

[seattlecyclone]

I'd probably go with something similar to the recommended asset allocation for someone early in their career: mostly stocks, maybe some bonds, mostly domestic, some international. You don't need to get too fancy with it, just get that money working for your kid and watch it grow as he does.

[moosejaw]

Hey Seattlecyclone,

I'm in Seattle too!  I was thinking of doing an index fund but do you think individual stocks have more upside for his age?

[Beric01]

I'd probably go with something similar to the recommended asset allocation for someone early in their career: mostly stocks, maybe some bonds, mostly domestic, some international. You don't need to get too fancy with it, just get that money working for your kid and watch it grow as he does.

Yup! I'd just go for a simple 3-fund portfolio. Keep it simple.

He's young, so you can definitely consider something such as an 80% stocks / 20% bonds portfolio, or perhaps even more aggressive.

Hey Seattlecyclone,

I'm in Seattle too!  I was thinking of doing an index fund but do you think individual stocks have more upside for his age?

Okay, I fully admit I'm Boglehead here. But Please read the Bogleheads wiki. For this question, I would check out this page, on passively investing in individual stocks. Particularly note this paragraph:

While creating a portfolio of individual stocks has some advantages, keep the following caveats in mind. An individual stock portfolio will be less diversified than the market portfolio, and will be exposed to the problem of market skewness. In addition, a portfolio of individual stocks is likely to require heavier bookkeeping burdens than investing in a total market index fund. Finally, empirical studies have shown that individual investors exhibit multiple behavioral errors that result in poor performance.

[seattlecyclone]

Hey Seattlecyclone,

I'm in Seattle too!  I was thinking of doing an index fund but do you think individual stocks have more upside for his age?

If you pick the right ones, absolutely! The hard part is picking the right ones. Those of us who aren't clairvoyant should stick to index funds. If you know how to outperform the market over a decade or three, what are you still doing working?

[DollarsAndDissonance]

Agree with the other posters.  A simple couple funds with a stock-heavy allocation is appropriately aggressive while still being relatively safe over the long run.

In addition to being a great investment, this is also an awesome educational opportunity.  Assuming 7% annual real returns, that money should double by the time he is 18 and would be worth $1M by age 56 or so.

Putting a very small portion (a couple percent) in individual stocks (maybe companies who make products he's interested in) might be fun for him to watch, but I certainly would not gamble the whole thing on it.  My dad tried to do this kind of thing with me when I was a kid, and I lost a ton of my meager savings.  Definitely made me hesitant about investing.

Also, Seattle represent!

[GGNoob]

I'd probably go with something similar to the recommended asset allocation for someone early in their career: mostly stocks, maybe some bonds, mostly domestic, some international. You don't need to get too fancy with it, just get that money working for your kid and watch it grow as he does.

Yup! I'd just go for a simple 3-fund portfolio. Keep it simple.

+1. I'd say 90% stocks and 10% bonds, with 30% of your stocks in international. That would look like this:

63% VTSAX
27% VTIAX
10% VBTLX

[Ybserp]

What is the money to be used for? Education? Getting started in life?

I would choose:
- If all education, $40,000 in Vanguard 529 Age-Based Portfolio.
- If otherwise, $5,000 US Gov't I-bonds (able to be withdrawn penalty free after 5 yrs making them available to buy a quality car [if truly required] or to be the core of the child's emergency fund as a young adult), $24,500 VTSAX and $10,500 VTIAX.

[TomTX]

Remember that for college, he will be expected to spend ~20-25% of his assets each year before he will get ANY financial aid.

One option: When he gets a job, he should stash 100% into retirement accounts, as they are typically not considered as assets for financial aid. He can take some money out of his $40k for spending money (perhaps half what he earns)