Tuesday, February 16, 2016

Teach Teens to Favor Stocks Over Bonds

Today’s fantastic family finance article is:

Full Stock Gauge

You are convincing your working teen to open a Roth IRA, right? Good. Excellent financial parenting! That’s the perfect parking place for that tax refund from last summer’s job. (If you can, match her contribution by some percentage as an extra incentive.)

Now, you just need to help your teen decide how to invest that new Roth contribution.

Given the recent stock market gyrations, you might be thinking something safe like bonds or Treasury bills.


Here’s why.

You’re teen isn’t going to touch that Roth account for over 30 years, right? Right.

Well, in that time-frame, stocks outperformed long-term bonds 99% of the time, and they outperformed short term bonds and Treasury bills 100% of the time. That’s a pretty thorough beating.

Check out the how and the why and the numbers in today’s article.

Based on such compelling evidence, you can feel more comfortable ignoring the scary market headlines, bypassing bonds, and selecting a low cost US total stock index fund for your teen’s long term investing.

P.S. As always, consult your financial advisor first.

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