Are you thinking of investing in your children’s future? Well, there are ways that you can do it securely and not risk losing your funds. Just like everything else in life, your best bet lies in making sure that you have done your research. You need to look at the past performance record of any investment you wish to undertake. The performance record should be in a span of not less than 16 years. In this article we are going to look at some of the investments that you should consider.
If you do your research well, stocks can offer the kind of investment that is inflation proof compared to other forms of investment. Stock investing is usually only considered high risk when you buy on a short term basis. For example, if you bought stocks at around 2006, then decided to sell at around 2008, most likely you lost money. On the other hand those who bought their stocks at around 2006 and are selling them now, they are definitely getting high returns. You have to remember what a stock means to you. You are buying into the ownership of the company. You have to look at it as your own business that could be affected by several factors.
It could be that it is the market that is sluggish. As soon as the market improves, you can be sure to make money. You should also buy into companies that are easy to manage, ones that you can easily tell whether they are doing well or not. That is the only way you can be sure that your research of the past performance of the company is likely to continue. They say past performance is not a guarantee of future performance. However, I consider it a good place to start when looking for red flags. Overall, by the time your children are almost ready to go to college, you should be ready to sell your stocks.
If you consult an investment advisor they may offer solid advice on which stocks to be looking at for long term growth, when your kids are older. But if you like the idea of picking them yourself then a service like StockMonitor.com would be useful. You can track your investment portfolio and get a whole suite of tools including their technical analysis stock screener which can show you companies that are in strong trends, or have sold off and may be displaying good value for money.
The other factor to keep in mind is that when it comes to investing in stocks, you have to diversify. You need to spread out your investment to multiple companies that are performing very well. There is a great likelihood that some will outperform others. You may even invest in companies that target the same market, but they appear equally strong. Over a period of ten years, it is possible for one of them to dominate the market. If you invested into both of them, you can rest assured your investment decision will pay off.
DRIPs or Dividend Re-Investment Plans Accounts
Some companies also offer DRIPs. This is where after you buy stocks, the dividends are reinvested back and your shareholding increases. They are great when you want to save for your children’s future but also teach them how to invest in stocks. When they keep seeing their shareholding increasing each year, they will appreciate the importance of investing in stocks.
Bonds are a form of temporary shareholding. You simply buy them for a specified period of time. Unlike regular stocks where you can hold onto them for as long as you want, bonds are a form of IOU. You are lending money to a government or an institution so you can get it back with interest. They offer a lower risk but at lower interest rates. They are less favored compared to stocks.
A 529 college savings account
This is another great way to diversify the investment in your children’s future. It involves paying their college tuition using the current rates. Many States allow you to do that and the tuition fees is transferable to other colleges in other States. It is a great way for you to secure your children’s education. Many people say they have never heard of this option but is is a great way save what you have in your child’s future education.
This is a form of stock ownership that allows you to let a mutual fund organization invest on your behalf. It is worth noting they charge you extra for that service and you need to factor that in your investment. They basically invest in several companies that they consider to be performing well. They allow you to own a portion of those companies through them. If you do not have time doing your own investment research, they offer a better investment option.
Those are among the top best options that give you great control both in investment and securing your child’s education and financial future. We hope that you have learned something and you will build on that to make informed investment decisions for your children’s future.
from Kids Money Management http://www.kidsmoneymanagement.com/investing-in-stocks-or-drip-accounts-for-kids/