Suggestions for investing on behalf of children for ETF

Hi Cynthia, great question.

Firstly, with a 20 year timeframe, looking at the last 5 years (or even 10 years) is not useful.

In general, if the focus is on capital growth, then it would make sense to look at ETFs which can be expected to have lower dividends and higher capital growth. This could mean ETFs like the ones you’ve mentioned, such as IVV.

Keep in mind, it’s possible technology underperforms at some point (as it did in the 2000s), so keep this in mind if you go for a tech focused ETF such as NDQ or FANG. That’s an additional risk compared to choosing a more diversified fund such as IVV or even VGS (which has other countries besides the US yet is still relatively low dividend/higher growth).

It’s possible the US as a whole underperforms the rest of the world (as it did in the 2000s also), so a high growth ETF such as DHHF could be another option. Ultimately, you’ll have to think about how much diversification you want or whether you’re happy to bet on tech/US continuing to do better.

Either way, nice work investing for your kids, and you’re definitely on the right track. Hopefully they appreciate it!

Cheers, Dave

This is a fantastic question. It’s always great to think about investing with a long-term perspective. You’ve already done a great job considering what type of account and the timeframe you’re thinking about.

Often investors consider either capital growth or dividend separately. However, sometimes it’s worth understanding the total return on an ETF. Platforms like Sharesight can help you have a more holistic view showing the total return of an ETF that includes both the capital growth and dividend return.

As for the ETFs you mentioned, it may be worth also considering what you want to invest in. NDQ and FANG are heavily weighted in the technology sector. With NDQ investing in only 100 companies and FANG investing heavily within that sector. This means that your portfolio would be heavily weighted towards American tech companies.

Here’s an article that dives deeper into the Nasdaq: https://pearler.com/explore/learn/blog/what-i...

And here you can compare the two ETFs: https://pearler.com/explore/invest/au-shares/...

Although tech companies have been tracking overwhelmingly positive, we never know what the future holds. Therefore it may be worth considering diversifying your portfolio in the case that the US Tech sector experiences any market fluctuations. One of the things you can do is consider if you want to invest in other companies within the US or internationally, or even locally within Australia.

Here’s an article that explores VAS along with A200, two ETFs that invest in Australian companies:
https://pearler.com/explore/learn/blog/how-do...

Of course you want the growth of your ETFs to be positive by the time you pass the investments to your children. But i

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