advice for investing inheritance for daughter

brg190_pete

Hi all

Long time lurker but only just registered. My daughter (13) has recently inherited £68k, and I want to invest this wisely on her behalf. I am looking for capital growth but with low risk.

I am happy for the money to be tied up for the next 5 years, but she may need to access some of the money after then for university etc.

We have already placed half into a 4 year fixed rate bond. But what to do with the other half? We are looking at a 4 year protected capital investment - where the capital is guaranteed and you track the FTSE100 index (max growth 5% every 6 months). Any views on capital-protected funds, or what else should we be doing with this money?

Thanks

dunstonh

We are looking at a 4 year protected capital investment - where the capital is guaranteed and you track the FTSE100 index (max growth 5% every 6 months). Any views on capital-protected funds, or what else should we be doing with this money?

Generally they are pretty rubbish with the terms stacked in favour of the issuer. Occasionally you get the odd good one but most the retail ones are pretty poor value.

QuietDragon

brg190_pete wrote: »

I am happy for the money to be tied up for the next 5 years, but she may need to access some of the money after then for university etc.

We have already placed half into a 4 year fixed rate bond. But what to do with the other half?

A completely off-the-wall suggestion, if I may... set up a Child SIPP, and deposit £3,600 of the inheritance in it each year between now and your daughter's 18th birthday.

If I were doing this, I'd dump it into funds such as:

Blackrock Gold and General
JPMorgan Natural Resources
Scottish Widows Latin America
JPMorgan New Europe
Aberdeen Emerging Markets
Aberdeen Asia Pacific
Baillie Gifford Emerging Markets Growth
Jupiter China
Jupiter India

Reason for this is that I would be looking for long, long, long-term capital gains and the above funds (or others like them) are positioned for this kind of growth due to the political, economic, societal and demographic shifts in the emerging and pacific rim countries, China, India, and Latin America.

You aren't me though, so you would have to do your own research and possibly get independent financial advice.

Advantages that I can see:

At the absolute minimum, 42 years of compounded investment gains.

You lock either four (£14,400) or five (£18,000) parcels of £3,600 into an investment vehicle which can't be accessed until your daughter is 55 (under current rules).

Take the £14,400 example (£3,600 invested on the opening day of each financial year 10/11, 11/12, 12/13 and 13/14), independent of any other fund inputs, and a presumptive annual investment return (shown below) provides a SIPP "pot" at age 55 of the following:

12% → £1,429,461
10% → £687,430
9% → £474,405
8% → £326,310
7% → £223,690

Doing this one thing (if it is technically and legally possible) would probably go quite some way towards sorting out your daughter's pension requirements in later life. Heavens, at the 10% investment return, she'd have over £20,000 in her pension pot on her 18th birthday!

Disadvantages: On her 18th birthday your daughter will scream "Mum, dad, why the hell have you shoved my money into a pension? I'm only 18! I don't need a pension yet!!!!!!!!" She'll them storm out in a huff and whine about it to her friends on Facebook.

*** By the way, the above calculations take no account of the benefits, if any, of the tax reclaim element of pension contributions... again, seek the relevant financial advice on this.

Just as a joke, I also calculated the figure for the SIPP pot if the fund were invested in BlackRock Gold And General, at the current day's 10-year ANLSD of 25.55%, and the figure was £149,413,693!!!!

Too funny!!!

Hope this helps.

jamesd

brg190 pete, what you should be doing is a range of unit trusts including some corporate bond funds as well as something like Invesco Perpetual Income. The term deposit you've already made is likely to ensure that there will be at least £68,000 in capital (ignoring inflation) in five years so the task for the rest is to try to avoid large losses while growing enough to cover inflation and maybe make some money.

The capital guaranteed products aren't generally worth having. If that one really limits growth to 6% in six month periods it's even worse than usual because growth in the index tends to come in spurts, not uniformly, so it'll significantly limit the return. If you hold funds directly there's also the 4% or so annual dividend income that is completely ignored in the capital protected products.

amcluesent

>what else should we be doing with this money?<

£5K in premium bonds
£15K in the 5yr issue of NS&I index-linked
£5K lent on A*36 market in Zopa
£5K in a ETF tracker for the Australian stock market
£5K in online savings account

brg190_pete

Guys

Thanks very much for the advice - given me some things to think about!

Kohoutek

It depends what risk you what to take. If you want some well managed low risk, low volatility investment funds that consistently return above cash, try:

Newton Real Return (unit trust)
CF Ruffer Total Return (unit trust)
RIF Capital Partners plc (investment trust)

They emphasise capital preservation above all, but generate reasonable capital growth.

jamesd

Kohoutek, perhaps you meant RIT Capital Partners, the investment trust of the Rothschild family, also available to everyone else?

Kohoutek

jamesd wrote: »

Kohoutek, perhaps you meant RIT Capital Partners, the investment trust of the Rothschild family, also available to everyone else?

Sorry my mistake, you're right. I hope any money invested in the trust is in reasonably safe hands if it's primarily invested for the Rothschilds!

cashbackproblems

Kohoutek wrote: »

Sorry my mistake, you're right. I hope any money invested in the trust is in reasonably safe hands if it's primarily invested for the Rothschilds!

Yep over the years this fund has massively outperformed the market, i remember reading somewhere it had increased 60%+ over 5 years. However the dividend was less than 1% so you buy it for capital growth, and personally this seems to have hit quite a high comparing it historically, however its still a safe investment.