If you want to build your own Future Fund for kids or your grandkids, these are the stocks experts currently recommend you buy.
I often get asked by parents and grandparents about stocks to invest in to build a portfolio to help pay for the future education and costs of raising children. As I have a daughter and daughter in-law both expecting in November, this question has taken on more relevance in our household.
So I decided to go straight to the gurus I interview on my sharemarket show The Call on the Ausbiz streaming network. It is a simple premise: one stock you’d recommend for a Future Fund portfolio aimed at hedging against the cost of raising kids or grandkids.
Stocks the gurus recommend for a Future Fund for kids/grandkids
Betashares NASDAQ 100 ETF
Scott Phillips, Motley Fool, says, “The companies that are already in the index, and those that will be added, are the companies that are going to invent the future.”
Mark Moreland, Team Invest, says it’s been a great performer, fits the brief and he can’t see the business model being disrupted any time soon.
This is an Aussie-listed cyber-security business who Mathan Somasundarum from Deep Data Analytics says is “perfectly poised to ride the global tsunami into online learning.”
Gaurav Sodhi, Intelligent Investor, says this one fits the brief perfectly. “Fantastic management, loads of long-term value and its rich diversity of businesses,” he says.
Kip McGrath Education
Andrew Page from Strawman says this small, family run tutoring franchise has doubled revenue and tripled profits since 2013.
Michael Wayne from Medallion Financial likes this ‘oldie but a goodie’. He says it’s hard to go past as it continues to compound its earnings growth at double digits each year.
Ben Clarke, TMS Capital recommends this investment management company run by one of the founders of Magellan, Chris MacKay. He says it has a great track record and very low fees.
The Walt Disney Co
Owen Raszkiewicz from Rask Media says this is “a company which is over 100 years old, constantly reinvents itself and always delivers to investors.”
Luke Winchester, Merewether Capital says it’s guaranteed to be around in 20 years, given its 100 year history, and is home to some of the best intellectual property in the world. It’s a stock your kids would see real value in.
Vanguard Diversified ETF
Andrew Wielandt, DP Wealth Advisory, says it fits the ‘future fund’ brief as it provides a nice mix of defensive and growth assets. He says over the past four years the ETF has been clocking 9 per cent annual returns.
Henry Jennings, Marcus Today, reckons Wesfarmers has a nice conservative bias in its retail assets and there’s future growth factored in holding a lithium asset. With the share price down, Henry says it’s an even more attractive buy.
Howard Coleman, Team Invest, says Baby Boomers will only continue the company’s existing success, boosting demand for its plasma products even further. He says CSL is not a “screaming buy” at current levels, but with an investment horizon of more than 10 years, he says it’s worth it.
Gary Glover, Novus Capital, says going with a single stock is too risky for him. So he picked listed investment company Argo Investments, saying it gives you greater diversification, providing a mixture of growth and dividends.
Global Data Centre Investment Fund
Adam Dawes, Shaw and Partners, recommends this one. The data centre operator is sitting at a “fantastic buying level” and Adam thinks it might have some acquisitions in the pipeline. He says it’s a perfect stock to put in the sock drawer and watch grow over time.
Rudi Fillapec-Vandyk, FNArena, says it fits into the education megatrend that he sees continuing for years and it’s the best in its sector.
Claude Walker, A Rich Life, already buys a stock of it every year for his son’s birthday. Again thinking long-term, Claude says it’s impossible to find another company that has “a tax on everything” like Google.
More ways to invest for the kids
Provide pocket money
While it might seem counter intuitive, pocket money is actually a great way to teach your kids important financial skills. Just attach some strings.
Concepts like budgeting, saving, planning and goal setting can all be introduced using their weekly allowance. Here are four non-negotiable rules if they want to receive pocket money:
- They must have a savings plan
- They’ve got to stick to a proper budget
- They need to work for their money
- Regularly give to charity is part of the deal
Helping them to start a business like a lemonade stand or a babysitting or lawn mowing service over the summer will give them a huge advantage. They’ll start to appreciate how economics, customer service and business works. Early lessons that will help them out for life.
Teach the value of hard work
A part-time job is an essential part of growing up.
It teaches kids about responsibility, honouring commitments and the value of money.
Yes, they have a lot on their plate as they hit late high school. Their study and social commitments start to pick up, but they still have to learn about balance. A part-time job will teach them how to find that balance.
It’s never too early to start teaching your kids about investing.
With time on their side, kids are in a great position to benefit from the magic of compounding returns.
Start with explaining how shares work with practical examples.
Micro-investing apps are a good place to start as the kids can track their progress with ease.