Kids Portfolio: How to Pick Stocks to Pay for College

Written by 
Polina Median
/
July 13, 2022

Answer: Samsung

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how to save for college portfolio

We wish our parents had started investing when we were little so that we wouldn’t have to take a student loan. We can do this for our children though. Having seen hundreds of investment portfolios, I’m going to share steps that parents can take to create a portfolio for saving up for a future Harvard graduate.

Choose themes to invest in that your kid will like

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Start early. Like right now. 

The earlier you start saving up and investing, the more compound growth you get, i.e. money will not just add up, but it will multiply itself. Forget about “I’m gonna start saving/investing/eating healthy when I earn more,” it’s an illusion. Even $100 can make a miracle in 16 years given monthly contributions of $100 and, of course, the longer you hold, the more you get. 

investment calculator how to count returns

To work this out with your own parameters, try our investment calculator.

Use a tax-advantaged account

Obviously, saving up in a jar is not an option, because the inflation (which is 8.6%!) will eat it up. There are different types of investment accounts, but the one that you should check first is a 529 college savings plan

  • It provides tax-free investment growth and withdrawals for qualified education expenses. 
  • Generally , there are no limits on contribution in this account. 
  • More than 30 states offer tax deduction on this, but contributions are still subject to gift tax exclusion limits for federal taxes (which is $16,000 per donor in 2022). 
  • With this money you can pay for tuition, accommodation, books and even a printer for your kid. 
  • If he or she receives a scholarship, then you can withdraw the equivalent amount of money without penalty, but it will be subject to taxes. 

To get a clear view on other types of investment accounts you can also check this article.

Pace your appetite for risk

You can start aggressively with very risky investments, such as Electric Cars, Bitcoin or Biotech, because you have time to wait for growth in case of a bearish market (like now) and rebalance the portfolio towards more stable assets like dividend stocks and ETFs. 

You have probably heard the rule about having a  % of bonds equal to your age. Well, in case of your child’s future, bonds will be unlikely to bring desired returns and also there won’t be a need to live off coupons. You are just going to sell stocks and withdraw money. So the goal is to maximize your yield in, let’s say, 14-16 years. 

model portfolios for different risk

Stock-picking

Basically there are two ways you can manage a portfolio: active and passive. 

Active assumes that you play along with the market trends. If you are to take this approach now, here’s what you might do in the current market:

  • Buy major crypto coins on the low (Bitcoin, Ethereum, Polkadot) and few smaller altcoins (Tron, Matic, Elrond).
  • Check inflation-proof portfolio with stocks that benefit from raising rates for 1-2 years, until the Fed starts printing money again (you can check the composition of it and buy in Gainy).
  • Find innovative companies that have fallen but have great potential in the future, such as Electric Vehicles, Semiconductors, IT Cloud Infrastructure, etc. 
  • Buy agriculture stocks in anticipation of global food shortage.

Note! In 1-2 years you will have to sell what has risen and change the strategy based on the market situation at that moment. That’s why it’s active.

Passive strategy suggests buying:

  • Fundamentally strong large-cap companies such as Microsoft, Amazon, Bank of America, McDonalds, etc.
  • Dividend companies such as in the High Yield Dividend TTF with an average dividend yield of 9%.
  • ETFs with wider exposure to sectors because you’ll be safer with bigger diversification.

And you would just add up to it every month and hold it until your kid reaches legal age.

3 ways Gainy makes this whole process easier

  1. It doesn’t matter which strategy you choose, you can set your parameters during onboarding in Gainy at different periods and see what can be a great addition to your portfolio at the moment. Or you can check the Match score on the stocks you have in mind.
  2. Buy current trends in the form of TTFs or ready-made portfolios by our top analysts and influencers you trust.
  3. Track the performance of your individual account, IRA, kid’s portfolio all in one place. 

Last but not least, seeing an exemplary portfolio might help you gather your thoughts and take action. Check this to see how Youtube dad did it for his child.

See what Gainy could recommend to your portfolio based on your time goals

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because I want to check what my friend has just sent me
The company developed and maintains technological products and services, namely Snapchat, Spectacles, and Bitmoji. Snapchat is the third most popular app among millennials and gets high profits from ads on the platform. Since TikTok is not available to invest in yet, Facebook is boring, we see Snap as a good choice to diversify your portfolio. We don’t know what keeps those kids so glued to screens in Snapchat but if companies profit from it, we can get a share thanks to investing in their stocks.
because xBox brings us together with friends
Microsoft is the second biggest company on the market in terms of capitalization. Xbox, Skype, Windows Office 365 are all part of Microsoft business as well as it develops, licenses, and supports a wide range of software products and services, as well as designs and sells hardware. The company’s future is as bright as it’s past with all the money the company invests in disruptive tools like AI. Next time you plan to buy another game for the Xbox console, you might also consider buying a Microsoft stock which is not very expensive.
because we want schools to be cooler
So we packed peanut butter and jelly sandwiches for the kids, now it’s time to go to school. The K12 Inc. is an educational technology company. The company offers a private education program, software and education services built to teach online for preschool students up to grade 12 or K-12. The company’s earnings soared up after the pandemic because we came to realise that online learning is not far in the future and may continue the trend.
because we like to treat our pets and ourselves, too
The American manufacturer of supermarket food JM Smucker Co also operates a pet food business including brands such as Milk-Bone and Meow Mix. It’s also the producer of the peanut butter JIF, kid’s all-time favorite filling. The company offers a 2.96% dividend yield and in the third quarter reported a 7% increase in net sales.
because we love playing games
If there is one game to teach you financial literacy - it’s Monopoly, which belongs to Hasbro, as well as unparalleled portfolio of approximately 1,500 brands including MAGIC: THE GATHERING, NERF, MY LITTLE PONY, TRANSFORMERS, PLAY-DOH, BABY ALIVE, DUNGEONS & DRAGONS, POWER RANGERS, PEPPA PIG and PJ MASKS, as well as premier partner brands. The company generates strong cash flows and pays regular dividends. The company’s business moves along the online trend and develops digital content in the form of TV shows, films, computer games.
because everyone has a favorite childhood hero
Disney is a widely diversified company which owns everything from toys to apparel, and books to video games: Disney Parks, ESPN channel, Pixar, Hulu and so much more. And now it bets on streaming services with Disney+ and threatens Netflix’s market share. The company revenue suffered a major drop last year due to closure of Disneylands, but has opened them in October and foresees a strong comeback.
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