Best thing for the Kids?

Hi everyone.. am I doing the right thing (as a complete novice) or can
someone point me in a better direction. I like putting a bit away for
the kids when I can (granted its not a lot of money)... They are 10
yrs and 9yrs.
I put $3000 each into a brokerage account for them. $1500 is still in
cash and $1500 has been in a mutual fund called FPPTX for the last
year. It has made a measly 2.95% (could/should I have done better?).

In addition to that one fund, I do put $50 each away for them a month.

So? should I move from FPPTX into ???? somethin else?
What should I do with the $1500 sitting in cash
How should I distribute the $50 a month?

Thank you soooo much..

JACK-UK

Re: Best thing for the Kids?

Ask this question at misc.invest.financial-plan. It's
moderated, but lately submissions appear within a few hours.

For one thing, there are state sponsored plans with vehicles
that will greatly enhance how much you can save.

"JACK-CALI" <> wrote
> Hi everyone.. am I doing the right thing (as a complete
novice) or can
> someone point me in a better direction. I like putting a
bit away for
> the kids when I can (granted its not a lot of money)...
They are 10
> yrs and 9yrs.
> I put $3000 each into a brokerage account for them. $1500
is still in
> cash and $1500 has been in a mutual fund called FPPTX for
the last
> year. It has made a measly 2.95% (could/should I have
done better?).
>
> In addition to that one fund, I do put $50 each away for
them a month.
>
> So? should I move from FPPTX into ???? somethin else?
> What should I do with the $1500 sitting in cash
> How should I distribute the $50 a month?
>
> Thank you soooo much..
>
> JACK-UK
>

Re: Best thing for the Kids?

JACK-CALI wrote:

> Hi everyone.. am I doing the right thing (as a complete novice) or can
> someone point me in a better direction. I like putting a bit away for
> the kids when I can (granted its not a lot of money)... They are 10
> yrs and 9yrs.
> I put $3000 each into a brokerage account for them. $1500 is still in
> cash and $1500 has been in a mutual fund called FPPTX for the last
> year. It has made a measly 2.95% (could/should I have done better?).

I think you're underestimating how well FPPTX has done. If you're just
looking at the share price lately, you may be ignoring the big
dividend/capital gain payout that took place earlier this month. That
payout lowered the share price but you still enjoy that gain. If you
factor that in, it's had a real return of around 15% year to date, which
isn't bad at all.

The big problem with FPPTX is the sales charge (load) of 5%. You had to
pay that up front to purchase shares in the fund, and every time you
purchase more shares you'll have to pay that. So I wouldn't purchase
any more shares of it. Try looking at an S&P index fund from Vanguard,
whose sales fees are minimal.

If the $1500 that's already in FPPTX is in a taxable account, I would
leave it where it is; don't move it. If you sell the shares you'll have
to pay capital gains tax on them, which is going to lower your effective
return even more. You've already paid the 5% load once, so you don't
have to pay it again. Just don't purchase any more shares of it. Go
with a Vanguard index fund instead.


--
Steven D. Litvintchouk
Email:

Remove the NOSPAM before replying to me.

Re: Best thing for the Kids?

Steven L. wrote:
>
> JACK-CALI wrote:
>
> > Hi everyone.. am I doing the right thing (as a complete novice) or
> > can someone point me in a better direction. I like putting a bit
> > away for the kids when I can (granted its not a lot of money)...
> > They are 10 yrs and 9yrs.
> > I put $3000 each into a brokerage account for them. $1500 is still
> > in cash and $1500 has been in a mutual fund called FPPTX for the last
> > year. It has made a measly 2.95% (could/should I have done better?).
>
> I think you're underestimating how well FPPTX has done. If you're just
> looking at the share price lately, you may be ignoring the big
> dividend/capital gain payout that took place earlier this month.

That's a good guess. Even though Yahoo doesn't report any distributions
for the fund in December, the fund took a nosedive of ~7% on Dec. 16th,
almost exactly a year after its 2004 December distribution. (So there
probably was a distribution then that wasn't reported.)

That, plus a 2% distribution at the end of June, plus the 5% load (that
represents a true loss), brings one into the neighborhood of 12%. Add
the "measly 2.95%" gain, and we're up to 15%, which is what you found
for the year:

> That
> payout lowered the share price but you still enjoy that gain. If you
> factor that in, it's had a real return of around 15% year to date,
> which isn't bad at all.

So, once one factors in the load, the actual gain was about 10%. Still
not too shabby.

In fact, this is close to what FPA reports for the past 12 months,
ending in Nov. (rather than Dec.), including the effect of the load:


My question is how one could get into this fund, which has been closed
since July 9, 2004? (Always interested in loopholes, for future
reference.)

It's a fine fund, with a great manager. (If it weren't for the load,
I'd be investing in his bond fund for myself.)

> The big problem with FPPTX is the sales charge (load) of 5%. You had
> to pay that up front to purchase shares in the fund, and every time you
> purchase more shares you'll have to pay that. So I wouldn't purchase
> any more shares of it. Try looking at an S&P index fund from Vanguard,
> whose sales fees are minimal.
>
> If the $1500 that's already in FPPTX is in a taxable account, I would
> leave it where it is; don't move it.

I would leave the money there in any case - you've paid the entry fee
(the load), you might as well benefit from it. (If you are planning to
use the money for college expenses, then you might gradually move the
money out; as a small cap fund, this fund is a bit too risky as your
kids get closer to high school.)

> Just don't purchase any more shares of it.

That's the real point.

> Go with a Vanguard index fund instead.

That may be a bit difficult, as these funds have $3,000 minimums. If
one wants to start with Vanguard (which isn't a bad idea), Vanguard has
positioned its STAR fund as a starter fund, requiring just $1000.

Or, one could purchase ETF shares (e.g. Vanguard's VTI total stock
market index VIPER) at a deep discount broker - on a $1,000 purchase,
this would cost under 1% of the investment. Beats paying the 5% load.
(Watch out for the commissions at your current broker, though - they are
likely much higher than you could get elsewhere.)

--
Mark Freeland

Re: Best thing for the Kids?

Mark Freeland wrote:

> Steven L. wrote:
>
>>JACK-CALI wrote:
>>
>>
>>>Hi everyone.. am I doing the right thing (as a complete novice) or
>>>can someone point me in a better direction. I like putting a bit
>>>away for the kids when I can (granted its not a lot of money)...
>>>They are 10 yrs and 9yrs.
>>>I put $3000 each into a brokerage account for them. $1500 is still
>>>in cash and $1500 has been in a mutual fund called FPPTX for the last
>>>year. It has made a measly 2.95% (could/should I have done better?).
>>
>>I think you're underestimating how well FPPTX has done. If you're just
>>looking at the share price lately, you may be ignoring the big
>>dividend/capital gain payout that took place earlier this month.
>
>
> That's a good guess. Even though Yahoo doesn't report any distributions
> for the fund in December, the fund took a nosedive of ~7% on Dec. 16th,
> almost exactly a year after its 2004 December distribution. (So there
> probably was a distribution then that wasn't reported.)
>
> That, plus a 2% distribution at the end of June, plus the 5% load (that
> represents a true loss), brings one into the neighborhood of 12%. Add
> the "measly 2.95%" gain, and we're up to 15%, which is what you found
> for the year:
>
>
>> That
>>payout lowered the share price but you still enjoy that gain. If you
>>factor that in, it's had a real return of around 15% year to date,
>>which isn't bad at all.
>
>
> So, once one factors in the load, the actual gain was about 10%. Still
> not too shabby.
>
> In fact, this is close to what FPA reports for the past 12 months,
> ending in Nov. (rather than Dec.), including the effect of the load:
>
>
> My question is how one could get into this fund, which has been closed
> since July 9, 2004? (Always interested in loopholes, for future
> reference.)
>
> It's a fine fund, with a great manager. (If it weren't for the load,
> I'd be investing in his bond fund for myself.)
>
>
>>The big problem with FPPTX is the sales charge (load) of 5%. You had
>>to pay that up front to purchase shares in the fund, and every time you
>>purchase more shares you'll have to pay that. So I wouldn't purchase
>>any more shares of it. Try looking at an S&P index fund from Vanguard,
>>whose sales fees are minimal.
>>
>>If the $1500 that's already in FPPTX is in a taxable account, I would
>>leave it where it is; don't move it.
>
>
> I would leave the money there in any case - you've paid the entry fee
> (the load), you might as well benefit from it. (If you are planning to
> use the money for college expenses, then you might gradually move the
> money out; as a small cap fund, this fund is a bit too risky as your
> kids get closer to high school.)
>
>
>>Just don't purchase any more shares of it.
>
>
> That's the real point.
>
>
>>Go with a Vanguard index fund instead.
>
>
> That may be a bit difficult, as these funds have $3,000 minimums. If
> one wants to start with Vanguard (which isn't a bad idea), Vanguard has
> positioned its STAR fund as a starter fund, requiring just $1000.
>
> Or, one could purchase ETF shares (e.g. Vanguard's VTI total stock
> market index VIPER) at a deep discount broker - on a $1,000 purchase,
> this would cost under 1% of the investment.

The only other thing he didn't mention was taxes. I don't know what his
plans are for the money, or where this fits in to his overall plan for
his kids' future. If it's for their college education, he can get into
a Coverdell ESA for as little as $500 (though its maintenance costs make
it worthwhile to contribute the full amount). If it's something he
plans to bequeath them as an inheritance, then he's got other issues to
think about.


--
Steven D. Litvintchouk
Email:

Remove the NOSPAM before replying to me.

Re: Best thing for the Kids?

I think Scottrade does not charge any maintenance fee.
One can start with $500 in an excellent fund like UMBIX
(Excelsior Value and Restructuring), which is NTF at
Scottrade.

Kaspa

Disclaimer: I have owned UMBIX for about three years now
at Scottrade.