Advice to consider before a teen trades online

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QMy 13-year old wants to take the $2,000 in his savings account and have me or my husband open a custodial account for him with an online brokerage. Should I pursue this in the hope that we'll all learn more about the market and buying and selling stocks? Or is he better off in something safer, like a CD?

D.C., Hamilton, Mass.

A"Your son is to be commended for his curiosity," says Pat Schipper, a consultant with Prism Financial Group, in Overland Park, Kan. "But I wouldn't put all his savings in the market, given its turbulence."

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Why not enter in stages, she says.

"Have him trade an imaginary portfolio, to see how it does over a number of months." Then, "invest a smaller amount, such as $1,000, with an online broker, for learning how to actually trade stocks.

"Put the rest of the account in growth mutual funds. Some funds, such as T. Rowe Price, let you contribute small amounts monthly, such as $25 to $50. Have your son add to the funds monthly, if possible."

Finally, she says, keep a little in savings for rainy day purchases.

QI put the maximum allowable in my 401(k) plan, which amounts to about $300 a paycheck. That money primarily goes into aggressive-growth funds. Is this wise, considering the economy? I plan to work for another two or three decades.

C.S., Santa Fe., N.M.

A"Going into aggressive-growth funds makes very good sense, given your long investing time span," says Ms. Schipper. "Remember, you want to buy stocks when they are cheap, or the market is falling. For purposes of diversification, however, you might want to put some money into large-cap stocks that pay dividends."

QAre I Bonds [US Treasury inflation-adjusted bonds] a good investment? Where do you find them?

L.S., via e-mail

A"As one component in a portfolio of bonds, they make good investments," says David Bendix, who heads up Bendix Financial Group, in Garden City, N.Y. "Don't put all your dollars into bonds, however. Have stock and bond investments." I bonds currently yield 6.49 percent. Buy them from the Treasury at www.publicdebt.treas.gov or 800-USBONDS. You can also buy I bonds through a mutual fund, such as Pimco Real Return Bond Fund (800-426-0107). It's up 3.8 percent through Feb. 26.

Questions about finances? Write:

Guy Halverson

The Christian Science Monitor

500 Fifth Ave., Suite 1845

New York, NY 10110

E-mail: halversong@csps.com

(c) Copyright 2001. The Christian Science Publishing Society

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