childs baby bond investment

andreamorris22

I took out a baby bond for both my children when they were born but the first one which is 8 years it still running at a loss. I save £10 per month and if I cash it in now I will lose £500 but I am not sure if I am throwing good money after bad. Will the situation get worse before they mature in 9 years.

dunstonh

first one which is 8 years it still running at a loss.

It would be. It has very little or no value for a the early part and we had a major stockmarket crash last year.

I am not sure if I am throwing good money after bad.

Investments zig zag in value. Always have, always will. Its quite normal and to be expected.

Will the situation get worse before they mature in 9 years.

Crystal ball job. You havent actually said we you are invested (I made an assumption above that its stockmarket but you dont say).

andreamorris22

The baby bond which I chose is run by the Childrens Mutual through tunbridge wells so thought it would be a safer option, obviously not,.
I also put my £250 child trust fund with the same firm four years ago and that is now worth only £220 so again has lost value.

dunstonh

The baby bond which I chose is run by the Childrens Mutual through tunbridge wells so thought it would be a safer option, obviously not,.

They have low risk options, medium risk and high risk. The provider and tax wrapper have no real risk. The risk is with the invesmtents you choose to place inside the tax wrapper.

What are the investments?

andreamorris22

I am not sure what it is exactly invested in. My policy just says Tunbridge Wells Equitable with-profits Life and Endowment Fund. My husband wants to cash these in now and invest the money elsewhere but I am not sure what to do as if I do I will lose £500 of the money I paid into this.

dunstonh

My policy just says Tunbridge Wells Equitable with-profits Life and Endowment Fund

There you go, its the with profits fund. (which i hoped it wasnt).

My husband wants to cash these in now and invest the money elsewhere

Basically you bought a tax free endowment. The early years go in charges, the ongoing charges are high and the return potential is not great. However, any investment is going to zig zag in value. Some by more, some by less. So, you and your husband really need to understand that before you pull out and go into another one just to see a drop in value in a few years time.

Whilst these plans are obsolete and not very good, their charging structure means that sometimes you have to stick with them because of the way they are charged. The only way to know is to compare charges with modern alternatives to see what comes out best.