Wednesday 21 November 2007

Picking Stock for the Kids

I bought a couple of stocks for DS1 when he was one year old (six years ago), the idea being that they would be a good nest egg by the time he leaves home. At the time the banks looked set for continued growth (a lot less certain now) so I bought ANZ bank. There was also an opportunity to buy QBE when it was marked down due to concerns about insurance liabilities after 9/11. The other reason to pick these stocks was that they had bonus share plans, which means that dividends are foregone in exchange for bonus shares. This avoids income tax issues for the child, although there will be a higher rate of capital gains tax liability as the bonus shares have a zero cost base. Since then both stocks have done quite well, although ANZ has actually underperformed the broader market slightly.

DS2 has recently turned one, so the current market downturn is a good opportunity to buy a couple of stocks for him. I'm thinking of buying either Cochlear (COH), Commonwealth Serum Laboratories (CSL), or Computershare (CPU).

Copyright Enough Wealth 2007

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