Simply put: I want to put away a lump sum in a mutual fund NOW to pay for my 8 week old daughter’s college (yes, I will cost average it over several months). How about ranking several aggressive growth/small cap long term funds for me (or any other funds you think would be appropriate). Dave Waisel
Congratulations, Dave — mainly on the baby, but also on your foresight and sense of responsibility.
I knew just the man to field your query, my mutual fund guru. But before relaying his response, I have to share my own baby story with you.
We went to see BRING IN DA NOISE, BRING IN DA FUNK — which, if you’re in New York and have ever tapped your foot in time to a tune, you must float a bond issue and go see — with Benjamin and Jennifer Levy.
Benjamin’s principal claim to fame is that he can take a $100 bill someone has given him — jotting down the serial number first to be sure it’s the same one — and make it appear inside a sealed paper bag someone else, across the room, has been clutching. Indeed, not just inside the bag, folded and wet INSIDE A LEMON that’s inside the bag. This trick and others landed Benjamin a spread in Fortune recently. (If you happen to be a board chairperson, or better still a bored chairperson, grab him for your next meeting. Just click me for his number.)
Jennifer’s principal claim to fame at the time we sat down to eat was that she was very, very pregnant — estimated time of arrival just two weeks off. Sure, she has other claims to fame, but this one sort of overshadowed the others. We spent an hour trying to decide what to name the baby. (“Andrew” was my first suggestion. “Magic” was my second. Benjamin favored “Zebulon.” I thought “Ahab” would be arresting. There was much talk of “Nicholas” — too common.)
Anyway, off we went to the show, after which we put Benjamin, Jennifer and Ahab into a cab.
The next morning, I get this message on my machine. “Well,” says Benjamin, “BRING IN DA NOISE, BRING IN DA FUNK, brought in DA BABY at five nineteen this morning.” Less than seven hours after we parted — and this was Jennifer’s first. (Apparently, she woke at 1:30 dreaming that my friend and I were having contractions, we later learned — which I can tell you with some assurance we were not — only to realize, as the sleep-haze cleared, that she was having contractions. No great rush, but off they went to the hospital, planning on major anesthesia and a long day. Not Ahab! This kid — whom they inexplicably chose to name Nathaniel instead — was not letting any grass grow under his itty-bitty feet. Bang! Five nineteen a.m., nineteen inches, everyone’s fine, bless you for asking.)
OK, OK, so this is a little off the point. CNBC would not be taking your time with stories like this. So what about answering the question?
(As a service to the millions newly diagnosed with Attention Deficit Disorder, also known as the MTV disease, I herewith repeat the question: “I want to put away a lump sum in a mutual fund NOW to pay for my 8 week old daughter’s college. How about ranking several aggressive growth/small cap long term funds for me — or any other funds you think would be appropriate.”)
No one I’ve found is more sensible about mutual funds than my guru Less Antman. Having exhausted myself with Nathaniel, I figured I’d throw this question to Less. As usual, he did not disappoint:
“I’m godfather to identical twin pre-schoolers,” Less messaged back, “and their father asked me for exactly this same advice. At my suggestion, he established two mutual fund accounts with equal amounts being dollar-cost averaged into each:
(1) Twentieth Century Vista Investors Fund (TWCVX)
(2) Twentieth Century International Equity Fund (TWIEX)
“Both are available for starting investments of as little as $50 per month. These are maximum volatility funds with maximum long-term expectations. If you prefer index funds, then a 50-50 split between these two would also be a fine approach:
(1) Vanguard Total Stock Market Index Fund
(2) Vanguard Total International Index Fund
“These require $3,000 initial investments with additional investments of at least $100 per month allowed after that. The use of these broadly-based index funds should prove to be less volatile but, of course, somewhat less profitable over the long term than the Twentieth Century funds.
“A final excellent choice for someone who wants to use a single fund that balances off all of the different equity arenas, and includes an inflation hedge to boot (through natural resource companies) is the T. Rowe Price Spectrum Growth Fund (PRSGX). This is where I usually suggest friends put their IRA accounts when they want just one fund that will serve them for life. This is the only one of the choices I’ve made which I don’t think will suffer much in the upcoming bear market (assuming there is one). But if the fellow is dollar-cost averaging, he’d rather have a bear market right now anyway. And, of course, as the least volatile choice it will probably do a little less well over the long time periods.”
Looking at Less’s advice, I’d suggest his middle suggestion — those index funds — and then, if we ever get really decimated, with those funds down 30% and the Twentieth Century funds down 60%, I might switch from the index funds to the Twentieth Century funds. Or do half and half right now.
The main thing, though, is that you’re doing this at all. You will come out far ahead of those who can’t or don’t.
Quote of the Day
Capitalism without bankruptcy is like Christianity without hell.~Frank Borman (ex-Eastern CEO)
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