$1,000 to invest... Suggestions?

My father recently passed away and left my two children (12 and 13 year old) $1,000 each.

I know it's not a lot of money but it is for a kid.

Instead of them spending it on crap I'd like them to learn that investing wisely can see your money grow.

I don't want to see it go into any very high risk investments but happy to put it in shares or similar - open to suggestions.

I'd love to hear your thoughts.

Thanks

Dan

Comments

  • Let them spend a little of it on a fun purchase that will be used. Like a new bike or that new PlayStation game, or even a new doona cover, as a thank you to their grandpa.

  • a2 milk shares

  • Try investing in an ETF. They're a considerably low-risk option.

    • untilyou want to sell.

      What's the go with that? There's always only few buyers willing to pay a heap less than what sellers want.

      • Most have a small percentage invested in a cash-type asset for liquidity purposes. Read the product disclosure statement which would state how long it takes to redeem units. From my experience, share funds can be T+3 and and cash-type funds can be T+1.

        • I though this should be a liquid asset. Almost every stock on asx is more liquid than every EFT I've looked at.

          I'm obviously missing something, but to me that makes it a risky investment. I'd rather hold shares in a business and sell when I like than hold an EFT and have to lower my asking price to attract one of the few buyers.

        • @SlickMick:

          You hold units in an ETF and issue your redemption instruction to the manager and they arrange for the sale at that day's unit price. There's almost never a need to wait for a buyer to take your units off your hands. I've only come across one such fund where it was closed to new investors and had a time period of several years. Maybe you're thinking of one those but they are rare.

        • @kahn:
          I do my own buying and selling through ASX. By going through a manager you just don't see the discount he's offering to sell them. At least the stock market is honest in that respect: you can only sell something for what somebody is willing to pay for it.

          I just check VAS as an example, but the discount isn't much I guess: 0.38 of a percent.
          What concerns me though is that there are only 10 potential buyers. What if they decided they didn't want to buy at that price??

  • I'd consider an ETF like VAS, or VDHG. Set it up so it is in trust for them until they are 18 e.g.
    https://www.commsec.com.au/support/frequently-asked-question...

    The minimum purchase is normally $500, so you have enough. The fee to purchase will be somewhere around $10 -20 depending on the broker you use.

    You could perhaps invest $800-900 per kid, and let them go wild with the remainder.

    • Also note that the big-bank brokers (CommSec, NabTrade etc.) often have brokerage free periods for new customers.

  • Give them $100 each to have some fun. Put the rest in your super.

    When they turn 18, give them $1500 each.

    Win win.

    • You can't put it in your super and then take it out again.

      …unless the OP is 60?

      • +3 votes

        It doesn't need to be literally the exact same dollars. OP can put $900 in Super and give out $1500 a few years later without dipping into Super…

  • Black

  • +8 votes

    Sorry to hear op. Hope you're doing OK.

    Can always invest in a blue chip company. You'll get dividends (fully franked) and you'd have 5 years to see your asset appreciate. Then when you sell you get the 50% cgt discount(if this doesn't change).

  • Index fund tracking the ASX or similar where you own the share of the fund (so there is zero incentive for fees to be levied).

    Don't touch it for 30 years and retire.

    This is not a very exciting way of investing. Your returns should be slightly above whatever the stock market returns (if the stockmarket tanks so do you).

    There are similar ways of investing in property as well - just critically do not use products from banks or anything else where the investors do not own the fund. The aim here is to hold and utilise the "magic" of compounding wealth (same principle as compounding interest). Small fees can halve the amount you have after 30 years thanks to compounding.

  • Equity fund of some description. A 50/50 split of global and local shares would be fine enough for this situation. Set and forget.

  • buy the index fund "VAS"

  • I don't want to see it go into any very high risk investments

    Everyone recommends crypto -.-

    I recommend ratesetter.com.au
    Around 9.5% on a 5 year deposit, or around 7.5% on a 3 year deposit. Much easier to setup than shares, and in my experience higher reward and lower risk.

    • Set it to return the monthly interest to a bank account for them to spend on what they want so they can see the effect of interest in action, and tell them that if they save more money into the ratesetter account then they will get more spending money as interest. good life lesson.

  • A lot of folks here have mentioned an index ETF. ETFs are great, and if we were talking about $10,000 I'd say go for it, but it's dubious whether an ETF purchase makes sense at the scale of $1,000. The mere act of purchasing the ETF will wipe about 2% off your capital on day 1.

    Why not ignore the objective of making money out of the inheritance, and instead using it in some way to teach your kids how to manage money? E.g. https://www.moneysmart.gov.au/life-events-and-you/families/t...

  • Lets face it, $1,000 is not a big enough investment to truly expect to get big returns unless you are taking huge risks. Even with ETFs and various funds, its still not big enough to justify the investment especially when transaction costs are taken into account to buy/sell into the fund. Not to mention there is no guarantee that these investments will be profitable.

    If you truly want to invest in your children, the best thing you can invest is in their education. Use the money to promote their passions in a way that will educate them to be better adults as they grow up. Even if it is to learn a new life skill, it is money well spent. This is loose change on the scheme of things especially if the quality education they get yields high rewards in future in terms of high paying jobs.

  • Dune buggies!

  • AFI or ARG Shares as recommended by 'The Bare Foot Investor'. These are solid reliable Listed Investment Companies (LIC's) that have been around for a long time. Teach them about the stockmarket and get a dividend twice a year which they can chose to spend or re-invest. $1000 would get around 120 ARG shares and pay a $25 dividend twice a year. Setup with a low cost broker such as SelfWealth or IG.

  • shouldn't this be their call?

    I had friends this happened to. The 2 sisters just spent theirs and had a great time for a little while. Their brother saved his. The parents were so proud of him, but before long he decided to buy a game, then another one, then another. He ended up squandering his more than his sisters, though made it last a bit longer I guess.

    That's the end of that story - I couldn't find a moral in it. My brother told me I need to end my stories with "then I found $20" - it makes my stories far more interesting??