Confused with investment trusts, stocks, shares..etc.

MiddyMum

I am trying to get my head round all these financial terms because I want to start puting £80 a month into an investment trust for my 2 year old untill she is 18, maybe 21. The whole thing is giving me a headache. I already have a CTF account for her, but I would like something different.

I am thinking I may go with Hargreaves Lansdowne and open a Vantage share account with them. I need to choose a fund but I am not sure what fund I should be choosing, the best one or why? Could someone give me some pointers on how you choose them please?

Thanks for the help in advance, this is definitely not my expertise!

blinko

It sounds like you are very new and to be honest a good search of the forum will probably be the best way of gaining an understanding of the stock market.

The main threat to you will be loss of your investment, we are all used to putting money into savings accounts and for it to grow slowly. But with the stock market there is a lot higher chance of losing your money.

I mis-managed my risk and lost 80% on a stock approx £2k. I bought the stock at 65p and sold it around 13p.

a very expensive lesson!!!

Hargreaves is a good low risk broker, now all you need to do is choose a fund that you think will provide gains over the years!

gadgetmind

£80 a month into an Investment Trust can be tricky due to dealing costs as even the "sharebuilder" type accounts charge £2 per trade and HL will charge £11.95! No way is that a sensible option.

You could try asking here -
http://boards.fool.co.uk/investment-trusts-unit-trusts-50097.aspx?sort=collapsed

I'm sure they won't bite.

Of course, you could save into funds with HL.

psychic_teabag

For IT's you have to pay a dealing fee, and I think HL also charge a holding fee. I think that some IT providers allow you to buy direct which might work out cheaper. I don't know much about them, really.

http://candidmoney.com/ is quite a gentle introduction to investing, but there are of course many others, such as http://www.fool.co.uk/10steps/step1.aspx?source=uhpsitts0000001

JohnRo

Give it time, keep reading, don't get disillusioned by all the jargon and don't be anxious feeling you need to understand everything straight away.

The more things you invest in overall the better the chance that most of your money (as an aggregate) will be safe. By things I mean regions, sectors, and asset classes.

The smaller the number of things you invest in the higher the risk they may not return some or all of your investment, either short term or long term. but also the higher the chance, if you guessed right, that they'll reward you well.

Spreading your money to obtain lower risk doesn't necessarily mean having heaps of individual shares, funds or etfs though.

gadgetmind

psychic_teabag wrote: »

I think HL also charge a holding fee.

No holding fee for the unwrapped "Fund and Share" account, only in SIPPs and ISAs.

jimjames

Investment trusts can be a very good way to save for children. As above going to someone like HL will be very expensive.

Most ITs have their own savings scheme where the charges are extremely low. For example Aberdeen is purely the 0.5% stamp duty so on an £80 monthly investment you will only pay 40p in charges and £79.60 will be invested. In contrast with HL you will only have £68.05 invested per month due to the charges.

Because an IT is a mixed investment across many companies the likelihood of losing 80% of your money is far lower than with buying individual shares.

atush

I think she is confused, based on another thread and may be convising investment trusts with investments in a bare trust?

westy22

Well if it is an IT that the OP wants then I also vote for Aberdeen - they have a specific Children's account that has slightly lower monthly miniumums and can have online access to the account too.

MiddyMum

Thanks for the replies, yes I am definitely confused but I do want to go with the Investment trust, someone recommended it on my other thread. .I recently bought Smarter Investing by Tim Hale but even he assumes some prior knowledge.

Can someone explain to me simply, the difference between bare trusts, and investment trusts please. All I want to do is pay in £80 per month and leave it until she is 18.

Thanks.

jimjames

A bare trust is a special legal way of holding savings and investments - a wrapper as it were.

An investment trust and unit trusts are investments in their own right that invest your money into a variety of companies depending on their specified theme or investment areas - eg UK, USA, China etc.

To complicate things more you could hold unit trusts or investment trusts or even cash inside a bare trust.

As a wrapper a bare trust is similar to an ISA - it only holds something inside it, it isn't an actual investment itself.