Baby AAI is now walking running and so is his portfolio! He’s also starting to talk. He has plenty of time to grow and learn while his portfolio is also working for him.
I funded Baby AAI’s account with an initial $7500 in a taxable account and have been contributing $100/week since 02/27/17, so we’re just over the two year mark.
I figured it’s been a while since there was an update and there have definitely been some new transactions. The last update was the 1-year update that can be found here.
That 1-year old portfolio just held 4 positions, CRI, HBI, DIS, RDS.B.
The number of positions have doubled to 8 now!
Below is the current portfolio after 2 years. Previously Carter’s was killing it, up over 35% at around 120/share. Shares came down a little. The biggest winner currently is Paypal.
I’ve purchased new shares in FOXA, PYPL, PEP and just recently CVS. I also sold off just a few shares of Hanes (HBI) and have turned off any drips. I’ll let the dividends accumulate with new cash to put to work in my best ideas at the time. The 6th column is my cost basis followed by total return.
The last update valued the account at $13,448 which was above the projections of $13,225. So let’s see how we’re doing now against the original projections, which assume 7% compounding.
I’m hoping to achieve a 7% CAGR which will put the balance right at $200,000 by the time he’s 18. That’s by doing nothing else but contributing $100/mo and letting the power of compounding work its magic. I used a simplified actuarial formula assuming $7500 contributed right away and $5200 ($100/month) contributed at the end of each year.
Here’s a graph of what the value should be at the end of each year, of course the stock market has large swings up and down so this is in a perfect world of 7% compounding each year.
So basically, by the end of the second year, February 27, 2018, the portfolio should be valued at $19,350.75. At the end of February the portfolio was approximately $20,500.00 and is still currently ahead of schedule with a portfolio valued at $21,099.00.
I can’t wait to watch this portfolio grow! I’m sitting on about $1500 in cash and will be watching and waiting for another opportunity.
I’d love suggestions on a next purchase for BabyAAI.
I left a comment when you first launched this portfolio asking about your thoughts on a 529 account. Are you still pretty steadfast in keeping everything as taxable for now – and you see no advantage to deferring/avoiding taxes?
I ask because we just had our first child and I’m thinking through a savings plan for him.
Hi Noah,
Thanks for stopping by again. This was my original comment to you:
” I don’t like the fact that if the money isn’t used for college (you never know what might happen) then you are penalized an additional 10% on any gains to withdraw it. ”
That’s the main reason I’m not interested in a 529 plan. It’s use it or lose it.
I have a Roth and IRA and definitely see advantages to tax deferral. It really depends on if you think you will be in a higher or lower tax bracket when it comes to retirement or using those funds.
I keep most all my funds in a taxable account so it’s super liquid. If I need money for a real estate purchase or to pay taxes there is no penalty. I’m a little more hands on with my money and always looking for opportunities for investment so I like it liquid.
If you don’t like keeping up with individual companies, I’d recommend purchasing an S&P 500 fund like VOO. Keep consistently adding and dripping dividends. Most investors won’t beat those returns anyways and you can sleep well at night knowing you’ve invested into some of the best companies in the world.
Cheers and congrats on your first child!
After more thought, my action will be to only contribute up to the point that I get a tax benefit ($2,000 annually in MA). The lose it or lose it aspect is definitely a risk, but you can still use it on “all” aspects of education – i.e. private high school, trade school, or even change the beneficiary to yourself and take online courses.
I 100% agree and appreciate that you want to keep max flexibility.
Cheers,
Noah