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Monetta Young Investor: A Mutual Fund That’s Built to Play

MYIFX aims to build a child's savings while teaching about investing

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Financial Education

A quick look at the Young Investor Fund’s website shows a swath of bright colors and large graphics clearly geared toward kids. But MYIFX offers more than just window dressing. Upon opening an account, children will receive age-based financial kits, including fun items like an eco-friendly piggy bank and a quarter-collecting album, to more-to-the-point materials like newsletters and money management software.

Bacarella himself has written an investment tutorial geared toward high school-age kids, and he’s even working on creating a financially educational video game.

“That’s what lacks in today’s environment in terms of teaching kids financial literacy. Most plans have failed at it. And that’s because it’s not fun.”

But perhaps one of the best educational tools is the incidental by-product of the fund’s defensive nature — the glut of consumer names. In addition to McDonald’s and Apple, MYIFX also holds PepsiCo (NYSE:PEP), Disney (NYSE:DIS) and MasterCard (NYSE:MA) — again, businesses that are relatively easy for kids to follow. And the fund’s gains and losses themselves can be used to teach children the merits and pitfalls of investing.

“It’s a fund kids can relate to, the parents can relate to. They know when the market goes up, half of the fund is going up.”

College Funding

In addition to the actual gains of the fund, investment in MYIFX also provides investors with free enrollment in the SAGE Tuition Rewards program, which can generate up to $11,250 in tax-free tuition money.

The SAGE program uses a points-based system, with 1 point representing $1. Points accrue from a child’s first birthday through his or her 17th. It’s a simple program that Bacarella thinks trumps traditional tuition savings account like 529 plans.

“A lot of parents unfortunately don’t set up college saving plans because they’re confused. If they went into a 529 plan, which one should they go into? It frightens them rather than encourages them.”

When investors buy into MYIFX, their child receives a 500-point bonus, then earns varying point bonuses for every year of enrollment (and holding the fund) thereafter, awarded every birthday. In total, one child enrolled in SAGE from birth can accumulate up to $11,250, which can be used across a current group of 285 institutions — a number that’s growing by about a school every month, Bacarella said. However, while the list is vast, state schools (and their cheaper tuitions) are not eligible.

Bottom Line

Past the expense ratio, MYIFX’s $100 entry fee (with $25 monthly payments, to a total of a $1,000 deposit) and no-load status translate into a very cheap way to get into a mutual fund. And while the fund is marketed to kids, it’s not managed to their tastes.

“What good is it to have something that’s geared to a particular group of people if it underperforms?” Bacarella says.

Potential investors should note that while the fund has strong past returns, its makeup isn’t built for galloping gains. Investors looking for more robust returns certainly have a number of more fitting avenues to choose from.

MYIFX is built to limit downside risk, though it has enjoyed a nice ride over the past five years. Still, it’s not invincible — with 50% of its holdings in those index and large-cap ETFs (and the majority of its singular holdings in the same boat), broader market downturns will take their toll.

Still, past returns seem to vouch for MYIFX, illustrating that it’s more than a gimmick. While Young Investor happens to be packaged with kid-friendly bells and whistles, this mutual fund is built to play.

Kyle Woodley is the assistant editor of As of this writing, he did not hold a position in any of the aforementioned securities. Follow him on Twitter at @KyleWoodley.

Article printed from InvestorPlace Media,

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