My 2 year old daughter has a UTMA account with about $14,000 in it, comprised of $13,000 of Fidelity Total Stock Market and a $1000 CD maturing in January. The point of this account is to either help finance college when she's ready, or if she chooses not to go to college as a sort of "life starter fund" (help pay for trade school, buy a set of tools, jump start her FIRE path, etc.). My secondary goal is to make this account as hands-off as possible.
I'd like to start sloping the asset allocation away from stocks as she gets older. Ideally I'd use a target date fund like those found inside 529 accounts, but those are for some reason not available. The account has realized ~$1k of short term gains and ~$300 of long term gains for 2018 and the TSM is basically flat for the year.
Here's my plan:
- Sell the TSM, realize either a meager gain or loss
- Buy $12,500 of Fidelity Four In One Index FFNOX (85% stock, 15% bond) and $500 Fidelity Total US Bond Index FXNAX
- Direct FFNOX dividends into FXNAX
- When the CD matures, split it between FFNOX and FXNAX
- Future contributions will mostly be in the form of appreciated shares of FFNOX which I'll sell inside the UTMA
- Tax gain harvesting up to the top of the 0% bracket every year
Does this plan make sense? Should I be looking at something else? Would a target date fund make more sense?
I have a newborn daughter that I plan on replicating this with as well. I'd like to make them as equal as possible.
