Why I No Longer Believe in Small-Cap Value

Can a 12-year-old have a Roth IRA? Yes, if he has earned income, and a viewer named Gabe opened one at Fidelity for his son. Then he emailed me the portfolio he built for it and asked me to rate it. With 50-plus years until retirement, it's a question worth taking seriously.

The portfolio is four Fidelity index funds: 55% in the Fidelity ZERO Total Market Index Fund (FZROX), 20% in the Fidelity ZERO International Index Fund (FZILX), 15% in the Fidelity Large Cap Growth Index Fund (FSPGX), and 10% in the Fidelity Small Cap Value Index Fund (FISVX). The first two cover the whole market at no cost. The other two are tilts, a bet that large-cap growth and small-cap value will beat the market over the next five decades.

My verdict on Gabe's portfolio, and what I think matters more than the exact allocation, is at the end.

Resources mentioned in the video:

Fidelity Roth IRA for Kids: https://www.fidelity.com/retirement-ira/roth-ira-kids
IRS, family employees (children employed by parents): https://www.irs.gov/businesses/small-businesses-self-employed/family-help
Fidelity ZERO Total Market Index Fund (FZROX): https://fundresearch.fidelity.com/mutual-funds/summary/31635T708
Fidelity ZERO International Index Fund (FZILX): https://fundresearch.fidelity.com/mutual-funds/summary/31635T609
Fidelity Large Cap Growth Index Fund (FSPGX): https://fundresearch.fidelity.com/mutual-funds/summary/31635V729
Fidelity Small Cap Value Index Fund (FISVX): https://fundresearch.fidelity.com/mutual-funds/summary/31635T773
Morningstar Investor (Portfolio Manager and X-Ray): https://go.robberger.com/morningstar/yt-portfolio-review-12
Vanguard Total World Stock ETF (VT): https://investor.vanguard.com/investment-products/etfs/profile/vt

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0:00 A 12-year-old's Roth IRA: Gabe's question
0:19 Can a 12-year-old have a Roth IRA? Fidelity and the IRS
0:56 The four funds in his son's portfolio
1:14 Fidelity ZERO funds: 0% expense ratio, Fidelity's own indexes
2:53 The two tilts: large-cap growth and small-cap value
3:42 Large cap, small cap, growth and value, explained
5:05 Gabe's two questions
5:45 What I'd have said 20 years ago
6:21 My take today: which corner wins the next 50 years?
7:29 The portfolio in Morningstar
8:33 Stock Intersection: what each fund owns
9:38 X-Ray: allocation, fees, regions and the style box
10:50 My verdict on Gabe's portfolio
11:17 What I'd do for my granddaughter: VT
12:15 Four funds or one? Different, not better
12:49 The catch with VT: it always trails whatever's hot
14:52 What matters more than the allocation

ABOUT ME

While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. I've since sold my websites, bought them back, and started a new website and this YouTube channel.

I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (https://amzn.to/3by10EE)

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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.

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