Small Cap ETFs and Fidelity Youth Accounts

Gifts for Grandchildren include Money and Training

Recently Cindie and I gave a gift to our three oldest grandchildren: Violet, Mia, and Noelle. Someday, when they reach age 13, we would like to do the same for Charlie, Henry, and George. The gift is driven by some gospel truths found in the book of Proverbs and by a desire to show them love by helping them learn some principles about investing. The gift was in the form of dollars transferred from our Fidelity accounts to their new Fidelity Youth Accounts (FYA). You can find a link to the FYA at the end of this post.

Training Violet and Her Small-Cap Response

Recently Violet and her father came over for about two hours of my basic investment training. It was good to have Jason involved, as he was able to help explain some concepts to Violet based on his knowledge of her education. She is a senior in high school, and she is a very bright student, but sometimes even I need help in communicating complex concepts. Needless to say, we love her, and she is a delight (as are all of our grandchildren.) Shortly after her training, she told me that she had already purchased some ETF investments with some of the funds in her FYA. One of the funds she purchased was IJR (iShares Core S&P Small-Cap ETF). This delighted me, because in my training I told her about the reasons I think investors should consider small cap investments for better growth, even though they are sometimes with a higher risk.

Small Cap ETFs and Seeking Alpha

I often suggest two ETFs for small and mid-cap investments. They are IJR and IJH. There are others that are also worthy of consideration, and the following two images provide more details from Seeking Alpha.

Do I Follow My Own Investment Advice?

Preachers should practice what they preach. As you can see from this Fidelity extract, we tend to have more than the “normal” mix of mid-cap and small-cap investments. The reason I tend more towards value is due to my focus on dividend growth. I want to see dividend growth in our small, mid, and large-cap investments. Cindie and I have a combined total of more than 300 investments. Of those, 236 pay a dividend, and most of them have a history of increasing their dividends. This includes ETFs like DGRO, VYM and SCHD. Options make up 43 of my current investments, and those are all “short-term” because they will all expire in August. Only 25 of our investments do not pay a dividend. Most of those are small cap stocks.

Some Thoughts from Wise King Solomon

What you do for your children and grandchildren matter. Perhaps you don’t have children or grandchildren, so then you can focus on your nieces, nephews, or some other special young person in your life. Don’t miss the opportunities!

Proverbs 13:22 “A good man leaves an inheritance to his children’s children, but the sinner’s wealth is laid up for the righteous.”

Proverbs 14:26 “In the fear of the Lord one has strong confidence, and his children will have a refuge.”

Proverbs 17:6 “Grandchildren are the crown of the aged, and the glory of children is their fathers.”

Proverbs 22:6 “Train up a child in the way he (or she) should go; even when he (or she) is old he (she will not depart from it.”

All scripture passages are from the English Standard Version except as otherwise noted.

Full Disclosure

I do not own many shares in small cap ETFs. Rather, I purchase individual company stocks. However, I do have a small position in SCHWAB FUNDAMENTAL INTL SMALL COMPANY INDEX ETF (FNDC)

Link to Fidelity Youth Account information: FYA