Dividend or Growth (Stock & ETF) Portfolio for My Newborn Baby?
We've just become new parents.
Planning to open a minor stock account for my little one and invest on her behalf for the long term. Hopefully can build up a decent amount when she turns 18.
Question - Should we build a pure dividend portfolio & compound income by reinvesting all the dividends back into it? Wary of the tax implications as well, having to foot the bill every year under my name.
Or should we build a pure growth portfolio aiming for maximum capital appreciation? Problem is we plan to buy and hold, and won't be constantly monitoring or rebalancing if it goes up.
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It's amazing that you are already thinking of building up a portfolio for your newborn! I wish my parents did that for me haha.
In my opinion, if you are planning to hold long term, just go for one of the major index funds. Long run returns for the major indexes like S&P are good, and will not require much monitoring.
Alternatively, why not consider topping up her CPF-SA? You can net a virtually risk free 4%(5% on the first 60k) return on her SA balances. Plus, that sum in SA will be stashed away in CPF until retirement, and she would not be able to recklessly spend it. This is what i would do when i have a child.
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- For general cases, go for world index fund, VT or equivalent.
- You do not need monitoring for ind...
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Congrats on the newborn!
Be it Stocks or ETF, you may face risk of the market going down. What's the purpose of buying this for your newborn? if is about capital appreciation, perhaps, safer investment like Cash Management (yield 1-3% a year) is safer, and guarantees you returns!