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Author: DownwardSpiral One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75833  
Subject: IRA choices for YOUNG investor ??? Date: 2/10/1998 8:54 AM
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Hi, all--

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.]

Any feedback? Thanks.
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