Stocks and shares ISA - suggestions for 19 year old

Murdina

I have about £10k from grandparents which they would like invested in stocks and shares for my 19 year old daughter. We are looking at a 5 - 6 year time horizon i.e. that she would use the funds at that stage most likely to pay for higher education (postgraduate); otherwise would retain the funds for house deposit in due course.

Thus we want as far as possible to preserve the initial lump sum but with the possibility of some capital growth.

I am thinking of an ISA using FTSE 250 tracker - any suggestions as to ones which are low cost/easy to access (in terms of actually making the investment)? Or open to other suggestions?

System

Why track a UK index? You want to diversify so track a global index such as the MSCI World.

bostonerimus

Murdina wrote: »

I have about £10k from grandparents which they would like invested in stocks and shares for my 19 year old daughter. We are looking at a 5 - 6 year time horizon i.e. that she would use the funds at that stage most likely to pay for higher education (postgraduate); otherwise would retain the funds for house deposit in due course.

Thus we want as far as possible to preserve the initial lump sum but with the possibility of some capital growth.

I am thinking of an ISA using FTSE 250 tracker - any suggestions as to ones which are low cost/easy to access (in terms of actually making the investment)? Or open to other suggestions?

A FTSE 250 tracker does not give you any guarantee to preserve the initial lump sum. An equity investment will probably give you some dividends and also the chance of capital appreciation, but your desire to protect principal would be met in a cash ISA.

However, if I had a 19 year old child in the situation you describe I would advise they put the money into a mulit-asset fund with a high percentage of equities.....something like VLS100....and then make additional contributions on a regular basis as a high priority on a detailed budget that they create.

msallen

I'm not sure investing the right option here. Surely if she's 19 then post-grad studies will likely start in about 3 years. Even if it is 5-6 that's borderline really for equities.

Murdina

Thank you to all. [I do know by the way the earliest date when the post grad studies for which the funds are potentially required will start!]
There is no possibility of adding to the investment. It is a one off payment.

Any other suggestions much appreciated.

xylophone

5-6 years is rather short term for equities.

She might use £4000 in a LISA.

https://www.skipton.co.uk/savings/isas/cash-lifetime-isa

Deposit accounts here

http://www.thisismoney.co.uk/money/article-1621507/Best-savings-rates-Fixed-rate-accounts.html

Otherwise, she might consider a stocks and shares ISA with Vanguard.

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

http://monevator.com/using-vanguard-lifestrategy-funds-life/

enthusiasticsaver

Investing just in equities over a 5 to 6 year frame only using a UK tracker index is unwise and likely to be volatile. To minimise risk you should diversify globally so not only investing in UK but worldwide. I also like to diversify even further by investing in multi asset funds so using bonds as well as equities which tend to be less risky. The Vanguard lifestrategy funds are popular, I use the Vanguard LS 60 myself which is 40% bonds and 60% equities. All invested globally. Whether there would be a massive return though in 5 years is uncertain and there is always the chance that the markets may be low when you need to access it. Is there a reason the grandparents are asking for it to be invested and do they know the money is earmarked for post grad study or house deposit?

steampowered

Given that the average age of a first time buyer is 30 (or 32 in London), the potential investment term could be as long as 11 years.

I would say that a stocks & shares investment through a low cost fund such as Vanguard is very sensible.

kidmugsy

LISA. Help to buy ISA. LISA could be in S&S if the grandparents insist.

The LISA, however, is not suitable for paying for education.

P.S. How much should she expect a one year postgrad course to cost?

ValiantSon

steampowered wrote: »

Given that the average age of a first time buyer is 30 (or 32 in London), the potential investment term could be as long as 11 years.

I would say that a stocks & shares investment through a low cost fund such as Vanguard is very sensible.

Not on a 5-6 year timescale! It is a high risk strategy. You keep making these kind of comments without caveat and without any attempt to gauge attitude to risk!

Average age is utterly irrelevant! You do understand what an average is, don't you? It refers either to the arithmetic mean, median or mode. Mean is calculated by adding up all of the ages and dividing by the number of instances. Median is simply the middle point. Mode is the most frequently occurring number. When people talk about averages in everyday life they are normally referring to the mean. A mean takes into account all of the ages, but doesn't tell us about the spread of ages, and disguises the fact that half of the sample are actually younger than that and half are older. More to the point, averages tell us almost nothing about individual circumstances. I bought my first house at 22 - well below the average - could I have done the same thing now? Yes.

You have also ignored the fact that the most likely use of this money is to fund postgraduate study, so house purchase is not of primary relevance.

ValiantSon

Murdina wrote: »

I have about £10k from grandparents which they would like invested in stocks and shares for my 19 year old daughter. We are looking at a 5 - 6 year time horizon i.e. that she would use the funds at that stage most likely to pay for higher education (postgraduate); otherwise would retain the funds for house deposit in due course.

Thus we want as far as possible to preserve the initial lump sum but with the possibility of some capital growth.

I am thinking of an ISA using FTSE 250 tracker - any suggestions as to ones which are low cost/easy to access (in terms of actually making the investment)? Or open to other suggestions?

1. 5-6 years really is too short a timeframe to be considering equities investments. There is a very high risk of her having less than the original capital sum at that point.
2. Investing in just the FTSE 250 is extremely limiting. If she does invest then a world index makes a lot more sense, and, personally, I would advocate a multi-asset fund, e.g. Vanguard LifeStrategy; HSBC Global Strategy; Blackrock Consensus; L&G Multi Index.
3. With investments, you cannot preserve the original capital. All the capital is at risk, which is why they are not suited to short term objectives, and 5-6 years is pretty short term.

The best option - if that really is the likely timeframe - is to avoid investments. If, however, it can be extended to at least 10 years, and preferably longer, then investing is a good idea, but some good research is needed into how investments work and the available options.

If using savings, then there is lots of good advice on this forum about the best way to maximise available rates.

It is a very generous gift from her grandparents; it would be a shame if it were to lose value at the critical point through a poorly thought out approach to investing.