investing for children

ard123en

Hi all

I have a 12 years old son and would like to set up an investment account for him to build up a fund to start uni at age 18 or assist with a house deposit at age 21

my thoughts are that considering there is still a length of time that shares will be a good idea

the thing is at the mo I can only afford about £30 a month and my concern is that most of the money will be eated away by costs

any thoughts/ provider ideas

Arden

chesky369

Halifax Regular Saver for children gives a good 10% interest and can be added to by grandparents at any time.

Scouse_Mick

I think you're best bet would be a FTSE tracker. I believe you can get ISAs with charges as low as 0.5% on these. The reason being is that there's no need to manage the fund as the shares are picked automatically.

I've read that because of the charges on managed funds you're not likely to beat the market (ie the FTSE 100 growth) over time. Very few funds do anyway and the chances of picking the right one are slim so you're right to consider the charges.

I agree with you that shares will be a better bet than a high interest account over this period. Although that's just my humble opinion - I'm not an expert....

Another option would be one of those accounts were you get a mixture of savings and shares. I think National Savings at the post office do it. Half your money goes in a savings account and half goes on the stock market - but the good thing is that they guarantee that if the stock market goes down you'll get your money back. I'm not sure you can pay in monthly to those though.

dunstonh

I've read that because of the charges on managed funds you're not likely to beat the market (ie the FTSE 100 growth) over time.

You mean that same FTSE100 trackers that havent made a penny in the last 5-6 years whilst all UK stockmarket managed funds have?

I'm afraid that it is too simplistic to look at trackers in the way you have.

but the good thing is that they guarantee that if the stock market goes down you'll get your money back. I'm not sure you can pay in monthly to those though.

You cant do monthly and its a good thing because the GEBs are rubbish.

Scouse_Mick

dunstonh wrote:

....all UK stockmarket managed funds have made money

That's not true. Every single one has made money? More money that you would have made feeding monthly into a FTSE tracker?

You're right it is a simplistic view but that's the point. Some funds do beat the market but past performance is no guarantee of future success and the chances of picking the winning fund are slim. I've got some managed fund ISAs and nearly all were down until the last 12 months or so. If the whole market is going down it stands to reason that most managed funds will go down too.

Putting money into a tracker is relativally low risk over that long a time period and management fees are shown to considerably eat into returns over time.

Here's an article on the subject anyway. As you say dunstonh its not that simple and its up to the individual to chose.

http://whatinvestment.money.msn.co.uk/msnwi250.htm

dunstonh

That's not true. Every single one has made money?

Nope, even with dividends, most FTSE100 trackers have not broken even or have only just broken even in that period mentioned. It's one of the risks you take when you invest in just one sector.

I've got some managed fund ISAs and nearly all were down until the last 12 months or so.

You must have some real bad luck then.

If the whole market is going down it stands to reason that most managed funds will go down too.

Active managed funds tend to build in some downside protection and during volatile markets, they do tend to outperform trackers. During periods of sustained growth, the trackers do tend to outperform the same managed funds in the same sector. Generally passive managed funds are the ones to avoid.

Putting money into a tracker is relativally low risk over that long a time period and management fees are shown to considerably eat into returns over time.

No its not. A tracker doesnt have any risk attached to it. It's the sector it tracks that has the risk and investing all your funds into, say the FTSE100, to track that is medium/high risk.

Here's an article on the subject anyway. As you say dunstonh its not that simple and its up to the individual to chose.

They ought to put a date on that article. Whilst it covers some good points, it fails to cover asset allocation at all which should be the first driver behind any investment.

ard123en

ok ive been looking around and am going to open a stakeholder for him

that way will stop him getting the money at 18 and spending it on wine women and song

but im sure he will really think ive lost the plot when he reaches 18 and i give him the pension papers to look through :j