3 Types of Funds for College Grads
Give a meaningful gift to your favorite college grad.
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Russel Kinnel: If you are fresh out of college or thinking about being generous and giving a gift to a college grad, I’ve got some ideas for starter funds. How early you start saving will have a huge impact on how much you have in retirement, so starting right away will make it much easier to reach those goals. The key principle in picking that first fund is to find a low-maintenance fund that you can keep adding money to regardless of your level of sophistication.
3 Fund Types for College Grads
- Target-Date Funds
- Total Market Funds
- Actively Managed Global Funds
So my first idea would be a target-date fund with a target retirement around 2060. These are brilliantly designed, wide-reaching funds you can own for life. I like Vanguard‘s target-date funds, but BlackRock, American, and Fidelity also have some great ones. I suggest these for an IRA or Roth IRA so they can compound tax-free. The funds adjust their asset mix over time as the shareholder gets closer to retirement, so the investor doesn’t have to make those changes.
- Vanguard Target Retirement 2060 Fund VTTSX
- BlackRock LifePath® Index 2060 K LIZKX
- American Funds 2060 Target Date Retire R6 RFUTX
- Fidelity Freedom Index 2060 Investor FDKLX
Another option would be a total market fund. You could either pick a global total market or a US total market fund. Passive funds give you broad exposure, low cost, and they aren’t likely to change. Vanguard, Fidelity, and BlackRock all have open-end and ETF versions of these. Passive funds tend to be pretty tax-efficient, so these would work either in a taxable account or a tax-sheltered account.
- Vanguard Total Stock Market ETF
VTI
- Fidelity Total Market Index FSKAX
- iShares Core S&P Total US Stock Mkt ETF ITOT
Another option would be an actively managed global fund. The chief downside to this would be you have to do a little more monitoring of the investment. One option I like is Gold-rated T. Rowe Price Global Stock. Manager David Eiswert is a skilled investor who looks for high-quality companies but still keeps valuations in mind.
- T. Rowe Price Global Stock PRGSX
Watch 3 Funds for a Recession for more from Russel Kinnel.
Correction: This transcript was updated to correct the spelling of David Eiswert.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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