My kids are 8(in a couple weeks), 5 and 1. I think it’s just as much for an interesting learning experience for myself and them as it is for an actual return. If I can put in let’s say $1k per kid and have it be up a few grand each by the time they’re 16 that would be cool to offer it to them for buying a car or whatever they desire.
Okay, goal defined. Perfect.
As far as the level of autonomy, I’m not looking for set it and forget it style investing but I also don’t want to be in such volatile markets that I feel the need to make trades more than once a quarter or something. While I’m sure I’ll check it every day I don’t want to have to do that.
(Re-stating a gross simplification for conversation's sake) There are two primary ways to make money in the stock market: capital appreciation and dividends. The former follows the simple "buy low, sell high" mentality--you buy shares now, and hope that in the future when you want/need to sell them someone will pay you more for them than you did back in the day. During the time in between, your shares just sit there idle; you neither gain nor lose any money until the day you sell them. If you're going to follow the capital appreciation route, index funds are a
great way to diversify and thus mitigate the risk of putting all your eggs in one basket.
If the company you own pays a dividend, then things change--every so often, the company shares some of its profits with you and thus your shares are actually doing something for your bottom line. In the case of my Roth IRA, my entire goal is to create a sustained 'passive income' from dividends. This forces me to keep an eye on all the holdings in my account--if one of them reduces or entirely cuts their dividend, I've lost income and I may need to make moves to restore it via purchasing other holdings. (My goal, of course, is to hold onto my companies for the long term... and so long as they don't reduce their dividends, that is precisely what I will do.)
The smart solution to this, of course, would be to only invest in extremely stable, mature companies whose profits are steady no matter what the current market condition (think JNJ, for example). Such stalwarts usually pay modest but extremely reliable dividends. For your kids, I think this would be great. Because I got such a late start in life, I need to make up for lost time by ramping up my aggression and investing in companies which pay higher dividends. I need to dig into corporate finances, consider balance sheets, debt load, income and free cash flows, and think about the future and where (I feel) the company is headed... and then invest accordingly. This is a lot more work.
(BTW: some index funds pay a small dividend--usually in the range of 0.5%-1.5% or so--and you can DRIP that just like with individual stock shares.)
You've said you don't want to go entirely to one end of the spectrum or the other... and there's no need to do so. You can 'mix it up' and blend these two extremes to whatever degree you like. Rather than invest each child's allotment into one specific stock, spread it out over a few holdings--some very conservative, some less so. Ignore the ol' reliables, and keep an eye on the more aggressive ones. Your choices are almost limitless. Develop a mix that suits your desires.
) and if I keep contributing $5k/yr with those kind of returns, I'll have a very healthy additional retirement fund.
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