What to hold in a Junior S&S ISA

Qwerty789

Firstly, sorry if this Q isn't allowed or had been covered elsewhere (looked but couldn't find etc).

So, the textbook is: Our first born is due along this month and I'd like to open them a Junior S&S ISA for both regular monthly savings and presents from grandparents etc. For convenience I'll probably use my own ISA investment platform which I'm happy with but I'm less clear on what to hold in it. With circa 18 years as the timeframe it's going to be high(er) risk but I'm not sure if there's a low one size fits all fund that's worth looking at or whether it's better to seek out a combination of funds.

Any suggestions, and even better specific examples if rules permit, would be gratefully received. Thanks in advance.

MallyGirl

At 18 years to go I would go for something in the 80% - 100% equity fund market space - you can reduce the risk later.

Qwerty789

MallyGirl wrote: »

At 18 years to go I would go for something in the 80% - 100% equity fund market space - you can reduce the risk later.

Agreed. Not looking for a crystal ball type answer but I'm not clear what the perceived wisdom is. A global tracker? A fund which combines other funds? Something else? I'm not really striving for the optimal solution but rather something that stands a fair chance of beating cash on deposit at the enhanced rates children seem to get.

Voyager2002

The default answer is of course a global tracker: I would argue that you should ensure that it includes emerging markets (so not the famous Vanguard one). And if you have a hunch that something is going to be the next "big thing", whether that is Biotechnology; Clean Energy or whatever, then put 5 per cent (but no more) into that particular sector.

westy22

For an active / more adventurous choice over 15-20 years I would personally plump for Lindsell Train Global Equity - not a recommendation just my opinion.

bowlhead99

Qwerty789 wrote: »

Agreed. Not looking for a crystal ball type answer but I'm not clear what the perceived wisdom is. A global tracker? A fund which combines other funds? Something else?

In your OP you mentioned "I'm not sure if there's a low one size fits all fund that's worth looking at or whether it's better to seek out a combination of funds."

A combination of funds is just more work - and when you look at it every year or so, more stress that you didn't re-balance the different funds at the optimum times or you picked the wrong ratios between funds. So, stick to one product. What you want is just one product which holds investments and goes up in the long term without needing too much TLC from you while it does it.

You are right, that one product could be:

- a fund which simply tracks a global market (structured as an open ended tracker fund or as an ETF traded on the stock exchange),

- or invests in global shares selected by a manager (e.g. Lindsell Train Global mentioned above),

- or a fund which combines other funds using some fixed ratio or fund management judgement (a fund-of-funds).

The important thing from your perspective for an easy life is that you invest in a single product and don't have to do any of the ongoing judgement stuff.

18 years is plenty of time to sit through the booms and busts of an economic cycle and approach 'long term' return expectations. However, if you are drip-feeding the money in at birthdays and Christmasses etc then all the money won't be invested for all the 18 years. You should revisit in a decade (or earlier) and decide whether it might be suitable to pick a fund that's lower down the risk scale, because when you are 3, 5, 8 years away from your child wanting to spend the money, you might not want the value dropping down by 40-60% over the course of a year or two as you might find in a global equities fund, and then taking several years to fully recover.

Voyager2002 wrote: »

The default answer is of course a global tracker: I would argue that you should ensure that it includes emerging markets (so not the famous Vanguard one).

I agree that what you invest in should include emerging markets but don't understand the 'not the famous Vanguard one'.

If you are looking at ETFs, the famous Vanguard one is FTSE All-World (ticker 'VWRL') which *does* include emerging markets and has $2.5bn under management.

They do have a less popular FTSE Developed World ETF (ticker 'VEVE') which doesn't include emerging markets but it's only $300m in size and I wouldn't call it the 'famous' Vanguard one.

Assuming you are not looking at ETFs and are instead looking at open ended tracker funds, Vanguard has the FTSE Global All Cap Index Fund (over 6000 companies, which *does* include emerging markets) and it has the SRI Global Stock Fund (about 1800 stocks but only in the developed world and missing ones that don't meet the 'socially responsible investing' criteria).

Then they have the fund-of-funds 'Vanguard LifeStrategy' range which give you your choice of equity level mixed with bonds (e.g. 80%, 100%) and bias the investing a little towards the UK stockmarkets because the other pure equity tracker products mentioned above only have a few percent in the UK because the UK is relatively small on a world stage. They *do* still include emerging markets. They are more popular products than the 'pure' trackers mentioned above, and have about £4 billion invested in VLS 80 and VLS 100 combined.

As an aside, 'ETFs' and 'Investment Trusts' are often best avoided if you are contributing small amounts frequently because they are traded on a stock exchange and most S&S platforms will charge you dealing fees every time you buy them, whereas the platform provider may not charge transaction fees if you are adding or holding 'funds' (open ended OEICs or Unit Trusts) - basing the fee on a percentage of assets instead. But it does depend on the fee structure of whichever platform you are with.

And if you have a hunch that something is going to be the next "big thing", whether that is Biotechnology; Clean Energy or whatever, then put 5 per cent (but no more) into that particular sector.

It doesn't hurt to dabble if you have a strong conviction for one area or another: Tech, biotech, clean energy, natural resources, healthcare, biotech, the Indian subcontinent etc etc - a few percent in one of these specialisms might add a few percent to your total profits by the end. But if you try to cover them all at 5% each you run out of space for 'normal' investing so I'd agree it's good to exercise restraint and keep it simple.

If you have a particular affinity or conviction for one area there is no problem investing in that area in your own S&S ISA or pension while letting the boring global equities fund plod along in the JISA product. Otherwise when it is your son's third birthday and he gets £25 from Auntie A and £50 from Grandad B, you are going to have to work out how to invest 5% of the £75 (under £4) into biotech, and a similar amount in clean energy, rather than just throwing the whole £75 into your simple global equities fund.

xylophone

Vanguard offer their own JISA.

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

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

https://www.gov.uk/junior-individual-savings-accounts

And remember that the JISA can be split between cash and stocks and shares if desired.

The best rate currently offered here

https://www.coventrybuildingsociety.co.uk/consumer/product/savings/children/junior-cash-isa.html

https://moneytothemasses.com/quick-savings/parents/best-junior-stocks-and-shares-isa

Qwerty789

Thanks everyone - appreciate the posts, and sorry for being quiet for a couple of days whilst I did some reading.

I think you've confirmed what I suspected in respect of sensible options. In my mind, and I'd appreciate being corrected, I deciding between one of the following as being the single, simple solution:

- Vanguard FTSE Global All Cap (as above, tracking FTSE Global All Cap Index)
- L&G Global Equity Index (tracking FTSE World Index)
- Lindsell Train Global Equity (as above)
- Vanguard Lifestrategy 80% Equity (as above)

I admit I'm not really sure what the difference is between indices that the Vanguard and L&G trackers track, and the only other observation is that the former seems to have a slightly smaller fee. Any thoughts?

It doesn't really feel as if there is a wrong decision to make, they all do what they do in that sense. Not saying it's a coin toss but I suspect I'll end up plumping for one of them and hoping for the best...

Thanks again for the input; you've made sure I'm pointed in the right direction.

Haffertee

I’d be interested to hear people’s thoughts on this too. Although I have a significant chunk of my ISA in LT Global Equity and it’s done well for me, I wouldn’t have considered it suitable as the only fund to hold, mainly due to the small number of companies it invests in. I’m pretty sure I’ve read something from LT saying that due to their strategy they themselves thought it was a more risky fund than many of its peers. Interested to know what other people think, therefore.

Albermarle

There was a very similar question/thread yesterday , so probably worth the OP reading through that >

https://forums.moneysavingexpert.com/discussion/6001129/saving-for-my-babies-future

For what it is worth I will repeat my comment in that thread: The alternative to opening new accounts for the child is just to invest the money yourself and give them the money later. Pension contributions are usually the best way for an adult to invest due to the tax relief, This is especially relevant if either Mum or Dad is a higher rate taxpayer due to the extra tax relief .

Qwerty789

Albermarle wrote: »

There was a very similar question/thread yesterday , so probably worth the OP reading through that.

Thanks - hadn't spotted that had cropped up after I posted mine. I guess I'd ruled out some of the more inventive solutions that other OP had, like property or Premium Bonds, and was looking specifically at the content of a JISA. However the point about putting money aside in a SIPP in my name is interesting.

I'm in the higher rate band but couldn't contribute enough to avoid this. Getting the relief would be attractive, but as I'm early thirties I presume the plan would be that I'd have to use other money in lieu of accessing the pension in 18 years time (and then pay myself back when I could access it later on)? And I suppose the plan doesn't add much if I'm lucky enough to also pay the higher rate in retirement?