College Savings - buy/sell comics or tax free savings plan??

0

okay, you stated that you are not hurting for money, then this is what you should do (I rarely tell others what to do but I got it this time!)

 

1) Put the $10K in a 529 or other savings program.

 

2) Keep that information to yourself.

 

3) Tell her you are going the comic flipping route. Use your money, not the inheritance, but make her think she is using her inheritance money.

 

4) At college time give her which ever account has more money in it. (Yes, I understand a 529 will need the exact $ to go to college bills but you get the idea.)

 

She learns business, math, people skills etc. without the risk, which you as a good daddy cover for her.

 

Interesting idea but it may be a moot point since it sounds like she would rather just invest the money rather then go the comic route. I'm sure she can make way more in flipping books but it's got to be her decision in the end. I got my own inheritance that I'll probably buy books with so I guess we will see who comes out ahead in 5 years.

If you are going to compare the results in 5 years in all fairness keep track of the time you spend every week for the next 5 years buying, grading, bagging/ boarding, selling, etc, as I am sure she will spend absolutely no time at all on her investment.

okay, you stated that you are not hurting for money, then this is what you should do (I rarely tell others what to do but I got it this time!)

 

1) Put the $10K in a 529 or other savings program.

 

2) Keep that information to yourself.

 

3) Tell her you are going the comic flipping route. Use your money, not the inheritance, but make her think she is using her inheritance money.

 

4) At college time give her which ever account has more money in it. (Yes, I understand a 529 will need the exact $ to go to college bills but you get the idea.)

 

She learns business, math, people skills etc. without the risk, which you as a good daddy cover for her.

 

Interesting idea but it may be a moot point since it sounds like she would rather just invest the money rather then go the comic route. I'm sure she can make way more in flipping books but it's got to be her decision in the end. I got my own inheritance that I'll probably buy books with so I guess we will see who comes out ahead in 5 years.

 

If you are going to compare the results in 5 years in all fairness keep track of the time you spend every week for the next 5 years buying, grading, bagging/ boarding, selling, etc, as I am sure she will spend absolutely no time at all on her investment.

Good point. It would require some work on her (and mine) part so it's not a good comparison unless it's just buying books and forgetting about them for 5 years. It would be an interesting experiment to see which option would make more money in a passive investment situation.

I'm in my late 40s, invested conservatively in index funds the entire time, and have done better than 8% over that time.

Market returns vary. Someone who started investing in 1965 with a 30-year period will have different returns compared to someone who invested the same amount at the same intervals for the same period but started in 1966.

Here's FIRECalc backtesting based on historical returns for someone starting with $0 balance putting in $10K per year inflation-adjusted and investing in a 75/25 portfolio. Note, at the end of 30 years the ending balance varies from $300K to $1M with average (not median) of around $800K. That's not even accounting for black swans we have yet to encounter.

FIRECalc

^Nice post.

Never mind whether and what the allocation (If any) among the dow, s&p500, nasdaq (w/ or w/o financials) and the Russell for the equity part would do to returns.

^Nice post.

 

Never mind whether and what the allocation (If any) among the dow, s&p500, nasdaq (w/ or w/o financials) and the Russell for the equity part.

That 75/25, iirc, is Total US Stock and Total US Bond so same investments on all. It's just the starting year that varies.

Understood, my only point was that return would also vary depending on how the "equity" part is allocated among the US stock indices. I.e tech heavy or financials heavy, even using index funds, can affect returns. [i'd guess the US stock was S&P, probably.]

You should also consider an UGMA or UTMA as an alternative to a 529 account. There are pros and cons depending on your situation. http://ctainvest.org/home/saving-and-spending/saving-for-college/Are-There-Better-Options-Than-a-529-Plan.aspx

 

Personally, I would view any "investment" in comics as high risk, and many would call it gambling. Therefore I would only put a small percentage of your daughter's college money into such a vehicle. Also, 5 years is a relatively short time frame for college savings, so you probably want to limit your exposure to high risk assets.

 

And, most importantly, you should be talking to a financial adviser. I'm sure you can get free consultation with many banks and brokers.

 

I can speak to a lot of this as my kids mutual funds are now almost mature.

Be very careful with UGMA/UTMA. Here is why. That money will count when you go to apply for FA. That being said my kids funds are in UGMA and CSA(which grows tax free). I could have transferred them to 529s, but at the time I liked my funds better and still do. When I started with my kids those were really the only choices I had.

At the time I looked hard at 529s in my state when they came out.(My kids were young and I had their mutual funds just after birth.) Unless your state gives you a reason like IN and OH do on your state taxes look very hard at the the 529s returns. Sometimes they are not very good.

I would not even consider taking that money and doing anything comic related with it. Its too much of a gamble. Just invest it and let it grow. Compounded interest is a great thing.

While there is a chance you could make a lot more flipping comics is it really worth the risk?

Understood, my only point was that return would also vary depending on how the "equity" part is allocated among the US stock indices. I.e tech heavy or financials heavy, even using index funds, can affect returns.

True but not much 30-year history available for tech for backtesting.

Portfolio Visualizer probably has a tool available for this but I haven't really played with the other tools much.

Personally, tried lazy portfolio slicing and dicing for a while (Bill Schultheis Coffee House and FundAdvice Ultimate Buy & Hold) but it was way too much work rebalancing and too much temptation to tinker. Now, I stick to the KISS principle and have almost everything in target date funds: 95% contributions to VFORX and 5% goes to VHT with no rebalancing between the two. VHT is my hedge in case health care costs spiral out of control.

My daughter has 5 years until college and received $10,000 in an inheritance that is all going into her college savings before she spends it all on stuff. Here is the question - would you invest it in a tax free college savings plan or use the money to buy and sell books over the next 5 years? I'm not talking about buying a AF 15 and sitting on it for 5 years but the typical flipping situation (buying a collection or gradable books as many times as possible) over the next 5 years.

 

If she invest the 10k she will hopefully have 15k or so if her investments do really well over the next 5 years but that 10k could be big money if spent wisely on books over the same time frame.

 

Both options have some inherent risks but which would you pick? I'd like to sit her down and go over the pros/cons on these options and have her make an educated decision and your insight would be appreciated. I'd obviously help her with the comic flipping but I'd make sure she was involved in the process.

You have 10K and have a five year investment cycle? Send that money to me - I'll send you back 16K in five years guaranteed. I'll put it in writing.

My daughter has 5 years until college and received $10,000 in an inheritance that is all going into her college savings before she spends it all on stuff. Here is the question - would you invest it in a tax free college savings plan or use the money to buy and sell books over the next 5 years? I'm not talking about buying a AF 15 and sitting on it for 5 years but the typical flipping situation (buying a collection or gradable books as many times as possible) over the next 5 years.

 

If she invest the 10k she will hopefully have 15k or so if her investments do really well over the next 5 years but that 10k could be big money if spent wisely on books over the same time frame.

 

Both options have some inherent risks but which would you pick? I'd like to sit her down and go over the pros/cons on these options and have her make an educated decision and your insight would be appreciated. I'd obviously help her with the comic flipping but I'd make sure she was involved in the process.

I tried something like this when my daughter was that around that age...only it was with beanie babies. She didn't have an inheritance, I just used some of my cash and bought some of those very hot at the time stuffed animals at some local stores and said we were going to sell them on eBay. I wanted her to learn how to start a business.

If you do this, be prepared to A, do most of the work because she'll get bored, or won't know how to do certain things, or won't do them they way you'd like them to be done

and B, do most of the work because she's going to discover boys.

I already had a FT job, it was a 2nd job for me.I just put all the money (the investment money AND the profits) into a college fund for her. It paid for a little of her expenses, so that was nice....but it WAS a 2nd job, .

With Beanie babies at least I could have her pack, you just put on a tag protector, used a zip lock bag and a box, but grading? Packing comics? I don't think so...she might do the labels and go to the PO (with you car;) but no matter how terrific and wonderful she is, (and I know dads hate to hear this),but she's going to be a hormonal teenager...and not a male hormonal teenager.

You will be dealing with mood swings galore, her stressing over homework, wanting to go out and be with her friends (didn't we all?) and boys;) The boys will probably be of more help to you, because they will want to please her;)

Be prepared, . I had the easiest kid on earth until she turned 15;)

I'd do the half and half thing. Invest 1/2, keep 1/2 in case you see an opportunity, or she wants a car;) or you decide to get her a car so you are not driving around a zillion teenagers at all hours of the day and night;)

Whatever you decide, there probably is no horrible answer, so Good luck!

My daughter has 5 years until college and received $10,000 in an inheritance that is all going into her college savings before she spends it all on stuff. Here is the question - would you invest it in a tax free college savings plan or use the money to buy and sell books over the next 5 years? I'm not talking about buying a AF 15 and sitting on it for 5 years but the typical flipping situation (buying a collection or gradable books as many times as possible) over the next 5 years.

 

If she invest the 10k she will hopefully have 15k or so if her investments do really well over the next 5 years but that 10k could be big money if spent wisely on books over the same time frame.

 

Both options have some inherent risks but which would you pick? I'd like to sit her down and go over the pros/cons on these options and have her make an educated decision and your insight would be appreciated. I'd obviously help her with the comic flipping but I'd make sure she was involved in the process.

 

A couple of thoughts:

 

1) You would need the $10,000 investment to grow at nearly 8.5% per year to reach your goal of $15,000 in five years. I'm not sure what investments you were thinking of, but it's not likely you'll be able to manage a return that high. Most financial investments are pretty pricey these days, so returns that high over the next five years seem unlikely to me.

 

2) The flipping approach has a better chance because, in effect, you (and your daughter) would be earning some of the return through the time and effort you would put into locating, prepping, and selling the books.

I would take neither of your options because they most likely would not end up giving you what you expect in 5 short years.

Squeggs has already explained why the financial option is probably not a realistic one if you are shooting for a 50% net gain in only 5 years.

I personally also don't believe the comic book option is viable (unless you are a professional dealer working full-time at it) because it would take a lot of flipping, luck, hard work, and to get back a net profit of $5K. Especially since you are only starting with $10K as this small initial amount will not be able to buy enough true quality investment books. I personally feel that coming out on the winning side when investing in comic books is really done much more successfully through a buy and hold approach as opposed to a day trading approach.

So, it looks like the suggestion below is probably the best one to go with:

You are in Ohio? Not my business, but the Ohio 529 College Advantage is one of the best in the country, a savings plan that just keeps on giving, and allows a 2k deduction per year per beneficiary and can be carried forward to other taxable years, and family and friends can contribute and receive the same benefit.

 

Does she still go to college and come out the other side with the same amount of debt (preferably none) if all of the $10k goes poof? If the answer is no, I would say don't screw with your kids future - don't gamble it, or let her gamble it, or whatever the situation is, on something as volatile as the secondary comic book market.

You have 10K and have a five year investment cycle? Send that money to me - I'll send you back 16K in five years guaranteed. I'll put it in writing.

Never mind what I just said in my earlier post above.

Take this option as it will give you more than what you was expecting and you would have somebody else doing all of the grinding work for you, without you having to do anything at all.

Here is a good 45 day investment

https://www.wellsfargo.com/jump/checking/everyday-special/

You have 10K and have a five year investment cycle? Send that money to me - I'll send you back 16K in five years guaranteed. I'll put it in writing.

Hi Bernie!

You have 10K and have a five year investment cycle? Send that money to me - I'll send you back 16K in five years guaranteed. I'll put it in writing.

 

Never mind what I just said in my earlier post above.

 

Take this option as it will give you more than what you was expecting and you would have somebody else doing all of the grinding work for you, without you having to do anything at all.

I get to keep all the rest. And there will be a lot of it.

You have 10K and have a five year investment cycle? Send that money to me - I'll send you back 16K in five years guaranteed. I'll put it in writing.

 

Never mind what I just said in my earlier post above.

 

Take this option as it will give you more than what you was expecting and you would have somebody else doing all of the grinding work for you, without you having to do anything at all.

 

I get to keep all the rest. And there will be a lot of it.

If I picture your avatar saying this it is a tad creepy.

You have 10K and have a five year investment cycle? Send that money to me - I'll send you back 16K in five years guaranteed. I'll put it in writing.

 

Never mind what I just said in my earlier post above.

 

Take this option as it will give you more than what you was expecting and you would have somebody else doing all of the grinding work for you, without you having to do anything at all.

 

I get to keep all the rest. And there will be a lot of it.

Hell - I bet you could double the 10k in less then a year. Can't imagine what you could do with it over 5 years with compounding sales.

Our son is a HS senior, so he just finished with all his college applications before the New Year... so, for what it's worth, here's my take based on our experience. By the way? I've worked at a college for 20+ years.

With each year as you get closer to the college application process, your time gets more and more precious as a student. In fact, once they hit high school you need to start thinking in terms of putting together the kind of resume the kinds of colleges/universities your daughter is interested in is looking for. So from a simple cost-benefit analysis, you're better letting your money work for you, and not spending time flipping comics. Use that time more productively. Trust me, you don't want to look back when she's a senior and say "Oh, I wish she'd done x, y and z" three years ago. Flipping comics isn't a good use of her time. Have her get an interesting job. Start a charity. Something that sets her apart.

are you saying there isn't a 529 account already? If that's the case put it on the falcons. I wouldn't worry about it.