Simplicity Can Be An Effective Route

Most of the time when I review retirement statements for friends, I see problems almost immediately. One problem is a complicated mix of mutual funds. There might be two different large cap investments, multiple bond funds and some high expense ratios in the mix. Investing doesn’t have to be complicated. When I selected the investments for our granddaughters and grandsons, I wanted to set-it-and-forget-it. I didn’t want to have to sell investments frequently and I did not want to “rebalance” (with rare exceptions) the holdings in their accounts.

UTMA Accounts are a gift. You cannot legally take the assets back.


What is a UTMA? The Motley fool sums this up nicely: “Children aren’t legally allowed in most states to own financial assets, so parents who want their children to save and invest typically open custodial accounts. One common form of custodial account is known by the acronym UTMA. UTMA stands for the Uniform Transfers to Minors Act, which is the legal provision in many states that authorizes a custodian to hold assets on behalf of a minor child until the child reaches the age of majority — typically either 18 or 21. Although the custodian has legal possession of the minor’s assets in a UTMA account, UTMA also imposes a fiduciary duty on the custodian to hold the assets on the minor’s behalf. In addition, for tax purposes, the account is treated as the minor’s, rather than as the custodian’s, which has its advantages.” – from

During Market Turbulence and Volatility

The nice thing about picking quality assets is that I can ignore market volatility. The next four images show the results of ignoring downturns. One is of a specific UTMA account showing the balance activity and performance since the account was opened. The next three illustrate what a roller coaster ride the market has been. At the end of 2019, the accounts looked healthy. But on March 23 of this year it seemed that I had picked awful investments. I ignored the market and stayed the course. The accounts at the end of November 2020 have now poked their heads about $30,000 in total.

One grandchild’s UTMA account balance and performance history.
The six UTMA Accounts at the end of 2019 – Pre-COVID-19
The balances on March 23, 2020 during the worst of the COVID-19 pandemic.
What happened to the COVID-19 panic? Current balances have recovered nicely.

Rationale for the UTMA Account Holdings

There are five primary ETFs I intentionally selected for our grandchildren. Three of them are diversified dividend funds: DGRO, DVY, and VYM. Four of them focus on specific sectors: FENY, FHLC, FTEC, and FUTY. Of the four, the two I most highly favor are FHLC and FTEC. As you can see from the illustration, they also own shares in MAIN and VEU. MAIN is a BDC (Business Development Company) that pays a monthly dividend. VEU is an international focused ETF. In all cases the dividends are automatically reinvested.

These are the holdings of one of the six UTMA accounts.

Rebalancing the UTMA Accounts

I do not agree with the standard “rebalancing” approaches that I have seen. I also dislike bond funds for younger investors. When I say “younger”, I mean anyone less than 80 years old. However, that does not mean that some profit-taking is a bad idea. In January (2020) I sold six shares of FTEC for each of the grandchildren. The reason is simple: this technology ETF has performed extremely well. It was time to move some additional dollars to DGRO. Please note that I did not sell these shares during a downturn. The other sale was for eight shares each of DVY. Again, this was a strategic move, not a rebalancing decision. DGRO seems to have more long-term potential, so I wanted to increase the DGRO allocation and decreased DVY accordingly. DVY has a better dividend yield than DGRO, but DGRO has four times the number of holdings and has a different sector focus more in line with true dividend growth.

UTMA Motivation

There are many ways to show love to our grandchildren. We can spend time with them. In past summers, pre-COVID-19, I took each grandchild fishing. We visit them when they are at Camp Fairwood in the summer. Cindie has them over for sleepovers and I help with making breakfast for them. Time is an important element. But another way to show grandchildren they are loved is by teaching them important principles. They need to understand how to manage their own flocks and herds in the future. Our goal as grandparents isn’t just to give them some money, but to help them understand how investments can grow if you are a good steward and a careful investor.

Following God’s Example: His Saving Plan in Love

Let me conclude with a familiar passage in the Old Testament book of Exodus. “The Lord passed before (Moses) and proclaimed, ‘The Lord, the Lord, a God merciful and gracious, slow to anger, and abounding in steadfast love and faithfulness, keeping steadfast love for thousands, forgiving iniquity and transgression and sin, but who will by no means clear the guilty, visiting the iniquity of the fathers on the children and the children’s children, to the third and the fourth generation.’” Exodus 34:6-7 (ESV) In this passage we see the justice of God and the foolishness of parents and grandparents who do not take their sin seriously. But we also see that God has steadfast love and forgives sin. That forgiveness is the essence of the gospel. Jesus, the Son of God, came to seek and save the lost. That is the message of Christmas and the message of Easter. In fact, Jesus means “savior.” He is my Savior, by His grace enabled by the faith he has given me.

Ephesians contains a rich passage of amazing doctrine: “And you were dead in the trespasses and sins in which you once walked, following the course of this world, following the prince of the power of the air, the spirit that is now at work in the sons of disobedience—among whom we all once lived in the passions of our flesh, carrying out the desires of the body and the mind, and were by nature children of wrath, like the rest of mankind. But God, being rich in mercy, because of the great love with which he loved us, even when we were dead in our trespasses, made us alive together with Christ—by grace you have been saved—and raised us up with him and seated us with him in the heavenly places in Christ Jesus, so that in the coming ages he might show the immeasurable riches of his grace in kindness toward us in Christ Jesus. For by grace you have been saved through faith. And this is not your own doing; it is the gift of God, 9 not a result of works, so that no one may boast.” – Ephesians 2:1-9 (ESV) Boasting is excluded when it comes to the immeasurable riches God has given me. In the same way, our grandchildren cannot boast about their UTMA account balances. They had nothing to do with it. It was a gift given to them. In the same way my salvation is not my good deeds, but rather the good deeds and finished work of the one who saves.

I want our grandchildren to have a grandfather who is more like their grandfather’s Savior every day. That means I need to be mindful and thoughtful of the ways I can show them love. One of those ways is to be generous, just like God has been and is generous to me. God gave me a precious gift of “eternal life.” While I cannot duplicate that by any act on my part in the lives of our grandchildren, I can illustrate love in the things we do for them. May you seek to do the same.

2014 – When the six blessings were much younger before we opened the UTMA accounts. I was only 63 years old then.