Funds fit for teenage investors

  @Money September 3, 2013: 6:10 AM ET
The right investing strategy for you
NEW YORK (Money Magazine)

Which mutual fund should my teenage daughter invest in? She has $1,400 and won't need the cash for at least five years. -- Kathy, Michigan.

"At that stage in life, $1,400 seems like all the money in the world," says financial planner Tim Maurer, co-author of The Ultimate Financial Plan. So don't risk big losses that could scare her away from the market forever.

A balanced fund -- one holding both stocks and bonds -- should provide smoother growth than pure stocks.

Related: Money 70 - Best mutual funds

A good pick: Vanguard Star (VGSTX) , which comprises 11 Vanguard funds and holds everything from international stocks to short-term bonds. The minimum buy-in is $1,000 -- unlike many other funds, low enough for your situation.

Related: When should I dump an underperforming fund?

While Maurer terms Star relatively safe, your daughter can cut her risk further by putting some of her cash in a money-market fund instead. To top of page

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