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Investing for Son

Chris Farrell Feb 23, 2008

Question: I am thinking of investing my sons’ money (from gifts over the years) in index funds. My sons are 12 and 14 years old. Is this a good idea and would you recommend some low fee/no fee index funds? Thank you, Phyllis

Answer: It’s an excellent idea for long-term savings. (However, if you want them to learn how to invest, it’s usually better to open up a discount or online brokerage account for them and let them research and invest in individual stocks.) A number of the major mutual fund companies offer low fee broad-based equity index funds, such as Vanguard and Fidelity. To give you a benchmark, you’re paying too much if the expense ratio is more than 0.25% for a Standard & Poor’s 500 equity index fund.

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