Which mutual fund should my teenage daughter invest in? She has $1,400 and won’t need the cash for at least five years. — Kathy, Michigan.
“At that stage in life, $1,400 seems like all the money in the world,” says financial planner Tim Maurer, co-author of The Ultimate Financial Plan. So don’t risk big losses that could scare her away from the market forever.
A balanced fund — one holding both stocks and bonds — should provide smoother growth than pure stocks.
A good pick: Vanguard Star VANGUARD STAR FUND VGSTX -0.4% , which comprises 11 Vanguard funds and holds everything from international stocks to short-term bonds. The minimum buy-in is $1,000 — unlike many other funds, low enough for your situation.
While Maurer terms Star relatively safe, your daughter can cut her risk further by putting some of her cash in a money-market fund instead.