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Greetings, DownwardSpiral, and welcome.

<<My 16-year-old completed her first calendar year with a REAL job (yeah, Hardees!). As a gift, I will be setting a custodial IRA up for her with her earned income, with about $2,000.

My question: What would you do with the money, given the 50-year time horizon?

Thoughts that crossed my mind:

1) CD's until the pile becomes bigger. Not attractive at 5.75%.

2) Zero coupon bonds. Would be much more attractive if interest rates were higher.

3) DRIP a stock. Really hard to pick a single stock with a 50 year horizon. To get diversity, would probably have to DRIP another next year, etc.--now the number of accounts becomes a problem over time.

Any ideas on a long-term pick? [Yes, I'm keeping up with the DRIP portfolio discussions. What would YOU pick?]

4) Mutual fund family. Probably start with an index fund until the pile is, say, $10,000.

5) Discount brokerage account. Then, each year's contribution can be invested as one sees fit. The tricky part here is to find a deep-discount brokerage that I'm comfortable with AND has ultra-low or no ongoing fees AND will accept a custodial IRA AND will reinvest dividends AND will allow bond investments AND has decent no-fee mutal funds to pick from. This choice allows Foolis Four-type portfolios to be set up, once the pile grows to $4,000 or so. [I can't see buying 4 stocks with $2,000, even at $12 commissions--that's over 2% off the top.] >>

With a 50-year time horizon, the biggest bang for those dollars will be in stocks. Period. End of discussion. Nothing else will even come close. Therefore, IMHO you should scratch #'s 1 and 2. You have to decide on 3, 4 or 5. Me? It would be 5 without a question.. If no discounter will take the account, then I would go with 4 until the money builds to a point where a higher-priced broker's fees won't eat into the earnings that much.

Just one Fool's opinion FWIW.


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