NEW YORK Anyone looking for a child's Christmas gift with slightlymore substance than Pokemon cards or a shoot'em-up video game mightwant to consider a mutual fund.
Adults easily can purchase mutual funds for children through whatare called custodial accounts. These accounts allow an adult tomanage a child's assets until the child reaches the age of 18 or 21,depending on the laws of the state where the child lives.
The shares in the account can be purchased with the child's moneyor as a gift. Either way, the money in the account must be used tobenefit the child. If the account is closed before the child reachesadulthood, the adult custodian must prove that all of the assets willbe used for the good of the child.
Two funds that come to mind this holiday season are the Stein RoeYoung Investor Fund, for its educational component, and the Pax WorldFund, for its affordability and socially conscious investmentstrategy.
The Young Investor Fund was created in 1996 to help educate youngpeople about investing. In addition to being a mutual fund that seeksto capitalize on the growth of such household name companies asMicrosoft, Cisco Systems and America Online, the fund providesshareholders with educational material designed for the noviceinvestor.
Specifically, young investors who hold shares through custodialaccounts receive booklets with investment information related tostocks, bonds and the world's financial markets.
"It's very colorful, with lots of pictures and stuff to keep kidsinterested," said Wendy Rauch, a Stein Roe spokeswoman.
The primary purpose of the fund, however, is to begin theeducational process so that children learn the importance of savingand investing, Rauch said. "It opens up a dialogue between parentsand their kids," she said.
The fund's investment strategy is geared toward long-term growth,and at least 60 percent of the stocks included in the fund are fromcompanies whose businesses affect children. That mandate leaves thefund managers with a pretty wide berth, though, since all of the bigInternet and computer companies are having a broad impact on youngAmericans.
The fund, which has $882 million in assets, all of which areinvested in stocks, is affordable to most investors in that itrequires a $1,000 minimum investment. But investors can begin buyingshares with as little as $100 by agreeing to invest an additional $50each month until the minimum $1,000 figure is reached.
The Pax World Fund might appeal to parents who want to helpsociety while also looking toward their children's futures.
The World Fund, which has diverse holdings in international stocksand bonds, is a so-called socially responsible fund, which means fundmanagers use both negative and positive screens to determine whichstocks will be included. Companies whose businesses are deemed to beirresponsible or harmful to society are not allowed in the fund.
As is the case with most socially responsible funds, tobacco,liquor and firearms companies are excluded from the Pax World Fund,as are firms with histories of discrimination, harsh workingconditions or poor environmental records.
Conversely, companies with good environmental and workers rightsrecords are sought for inclusion in the portfolio.
Perhaps the most attractive aspect of the Pax World Fund is itslow initial investment requirement of $250, one of the lowest initialinvestment figures of any domestic mutual fund.
Analysts, however, are quick to warn investors that sociallyresponsible funds should be treated just like any other investment. Apotential investor should first ask whether a particular fund fitshis or her investment needs. If so, the investor should determinewhether that fund screens out the stocks of companies the investorfinds objectionable.
No comments:
Post a Comment