Investing for Kids

pkpk

I have a cash isa and savings for my 11 year old daughter but would like to add an investment.

Whats the difference between investing in HSBC Global Strategy, VLS or a tracker fund?

It would be a long term investment as she's 11 years old.

MaxiRobriguez

Well for starters HSBC Global Strategy and VLS are product ranges- there are different funds within these ranges.

The difference between these two will be the split between equities, bonds, property, cash, commodities etc. For example the HSBC Global Strategy (Conservative) is going to be broadly similar to the VLS40, both of which have a higher concentration of bonds than equities. Meanwhile the HSBC Global Strategy (Dynamic) is closer in line to the VLS80, with both having roughly 80% equity allocation. The 'riskiest' HSBC product (Adventurous) on paper looks slightly less risky than the VLS100, which is the most risky VLS product.

An index tracker surprisingly tracks an index. So for example a FTSE100 Index Tracker would aim to match the performance of the FTSE100.

If you're investing for an 11 year old, and you're not planning to give her the money when she turns 18, then I'd suggest the VLS100 would suit you best. It's easy to understand, diversified, cheap and over the long term (15+ years) is likely to perform quite well.

Also to consider cash will get worn away by inflation over time, so you might want to consider investing all the money you've put away for her, rather than it playing second fiddle to a Cash ISA/Savings.

SonOf

Whats the difference between investing in HSBC Global Strategy, VLS or a tracker fund?

VLS is a fettered fund of funds that is returns focused. HSBC GS is an unfettered fund of funds that is risk targetted. Both of these are multi-asset funds. A tracker fund will invest in a given area only and track a benchmark. Typically, when using a tracker fund (or any single sector fund whether managed or passive) you need multiple funds to build your portfolio.

Fettered means it only uses in-house funds. Unfettered means it uses funds from across the marketplace including in-house.

Risk targetted means it aims to remain within a target volatility range. Returns focused means it can move around the risk profile. How you view risk can depend on which one is better for you.

It would be a long term investment as she's 11 years old.

You mean medium term. upto 15 years length is generally considered medium term. at age 11, it's unlikely it would be long term.

The average consumer is cautious. In VLS terms that means VLS40 or VLS60.

pkpk

That's really helpful. Thank you.

cloud_dog

Whilst I would not disagree with SonOf's comments above one thing you may want to consider is usage of the monies? By this I mean that if your DD has available and a suitable amount in cash (for age 18) then it may make sense to have some money invested, and possibly for this money to remain invested for the longer term.

My DD has both cash and investment accounts and for the investment account I am not planning to de-risk the investments, i.e. move them out of equities or in to cash, or a less volatile higher bonds allocation investment. My thought (hope???) is that the investment (JISA) will continue as a ISA at 18 and possibly it may make sense to transfer/move that money in to a LISA to assist with a property purchase at some point in the future. Well, that's my plan. It just depends how hard I have to beat my DD to get her to agree