best mutual fund for new born baby

Mutual Funds for New Born Baby

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If you are one of those handful of parents that have been thinking about your child’s  financial future already, congratulations! 

Planning for a newborn is not easy and needs a well thought out strategy. 

Not only are you smart and responsible, the newborn is also very lucky to be born in your family. 

While it may be easy to set aside a small amount for the Child’s future, it requires management, planning and re-balancing each year to ensure growth.

Can a child have a mf account?

Investment for a child can be opened as a custodian account.  

Ensure that you read the terms and conditions of operating such an account and have nomination details filled out.  Also, be clear on the withdrawal rules and fees.

One of the easiest ways is to have a mutual fund account opened in your name and just have it set aside purely for your Child’s future.  

Some of the goals that you can start saving for are:

Higher education

Gift – Car, Vacation etc

Home/real estate



How much to save?

Once the goal is finalized, calculate current amount and then use a calculator to arrive at a future amount.  Remember to consider inflation and depreciation value of moneyHere is a link for one such future amount calculator.  

Tax angle?

If planning for your child comes with tax savings for you – go for it.  Take full advantage of the current income tax laws. However, also keep tab of changes and be prepared to shift your savings should there be any drastic changes in the system.

What to avoid?

Advisory package: stay as far away from any financial packages (insurance + savings combo) that people may try to sell you.  Don’t fall prey to such sales pitch. Do your own due diligence. 

Fees: whatever you invest in, make sure your fees are the lowest.  Even a 1% change can have a big impact (in millions) over the long term. 

Too many funds: Avoid too many funds.  Once your plan is ready, stick with 1-2 funds at the most.  Don’t keep switching funds, just because it was hot or there was a commercial about it on TV.

What are some of the best mutual funds for a new born baby?

My personal opinion listed below:

Vanguard Balanced funds

Vanguard Index funds

Vanguard Stock funds

Vanguard total market index etf

I request you to read through stock series by JLCollins where he writes to his daughters about savings. 

What strategy to adopt?

Since your child has 15-20 years to be needing the money, the best bet is Equity marketStock Mutual funds are the best bet.  

The concern with Stock mutual fund is if you go for an actively managed fund – will the portfolio manager continue to beat the market returns over 15-20 years?  Don’t think so.

The other option you can look at is a passively managed Index mutual fund or an Index etf.  You are buying the broad market which is a self cleansing mechanism.  Only the best stay in the index and you don’t get to choose individual stocks! 

The other option is to consider a balanced mutual fund which combines stock investing and bond investing in a predetermined proportion.  You get the best of both worlds.

You can use the rule of 110 to decide on the ratio mix of Bond and Equity for your child.  Use Child’s birthday to rebalance.  

Should i buy stocks for my child?

No.   too complicated and time consuming.  Stocks can go bust.  You may not be profitable in the 15-20 year duration. 

It’s always better to go with Index funds/etf to minimise risks associated with individual stocks.  

If you must consider buying stocks, keep them at a very small percentage of the child’s portfolio.  

Other investment avenues other than mutual fund?

Realestate: You could look at this option if you are bullish on the real estate market for the next 15-20 years and want to gift your child a house. 

Realestate and Stocks have continued to beat inflation over the long term.

Gold: investing in gold exclusively for your child is not a good idea.  You could add gold investment as a part of your portfolio – but not allocate more than 5% as John Bogle suggested.  

In Conclusion

Whatever option you select, make sure you keep tabs on your investments every once in a while – typically once a year on your Child’s birthday. 

Remember to keep it simple, low cost and DIY.   

Once you have a strategy finalized and put into action, the waiting game starts.  There will be times (market cycles) where you will be tempted to pull out money or change strategies.  Patience will pay off.

for more information check out the Tool kit section of this website here

Below are some recommendations from Amazon to help you further:

The Little Book of Common Sense Investing

The Simple Path to Wealth

Guide To Investing in Gold & Silver

The Book on Rental Property Investing

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