What funds do you invest in for a child?

chelseablue

I'm going to add a fund into my S&S ISA that will be for money for my son for the future.

He is 6, so could have 20 years before needed the money

So, I'm thinking to mainly be in global equities but just wondering what funds you have for your children? 

Alexland

Our young kids are with Fidelity where there are no platform charges for funds in Junior accounts. Their SIPPs are new and tiny (£25pm, mostly to see if they get a protected early retirement age so will stop contributing at £1k each) and invested in Vanguard Global All Cap (0.23%) and their JISAs are more substantial having made gains from investing at the bottom of the covid crash and invested 90% in Fidelity Index World (discounted to 0.10%) and 10% in Fidelity Index Emerging Markets (0.20%).

It would be easier to use HSBC FTSE All World (0.13%) in their JISAs but the Fidelity index tracker combination works out cheaper (weighted average 0.11% and the rebalances are free) and we hold the HSBC fund in a couple of our adult accounts so it would get confusing tracking them all as one investment line in my HL app watchlist.

I also felt charitable to give Fidelity some fund management business for running the free accounts and doing such a good deal on our capped adult SIPPs.

chelseablue

My ISA is with HL and my fund is Fidelity Index World and am looking at the HSBC FTSE All World for my son. So nice to see I'm thinking along the same lines as someone who I'm sure knows WAY more than I do

MX5huggy

I’m trying a bit of Vanguard ESG, mainly because you’ve got to get in at sometime and while the ESG can be debated as I say avoiding the really bad stuff I think is worthwhile, although it will make no difference. 

https://forums.moneysavingexpert.com/discussion/6258418/all-aboard-the-vanguard-ship#latest

Alexland pointed out how to get it cheaper as he has above. 

Alexland

chelseablue said:

My ISA is with HL and my fund is Fidelity Index World and am looking at the HSBC FTSE All World for my son. So nice to see I'm thinking along the same lines as someone who I'm sure knows WAY more than I do

If you are going to keep the money in an adult account and invest in index trackers you might find it cheaper transferring to Vanguard (unless the valuation is high enough for iWeb etc) as the 0.30% saving in platform fee will outweigh any difference in reasonably priced index fund charges. If you switch to a supported Vanguard fund first you should be able to switch in specie without time out of the market although it can take longer. I don't have an account with HL anymore but found you can still use the app watchlist to track investments on cheaper platforms. With the Fidelity Index World you are only getting developed world exposure so around 65% US which is looking expensive at the moment so you might choose to diversify with an emerging markets fund and perhaps some UK bias (which we do via an investment trust in our iWeb accounts because I value the dividend flow).

chelseablue

Alexland said:

chelseablue said:

My ISA is with HL and my fund is Fidelity Index World and am looking at the HSBC FTSE All World for my son. So nice to see I'm thinking along the same lines as someone who I'm sure knows WAY more than I do

If you are going to keep the money in an adult account and invest in index trackers you might find it cheaper transferring to Vanguard (unless the valuation is high enough for iWeb etc) as the 0.30% saving in platform fee will outweigh any difference in reasonably priced index fund charges. If you switch to a supported Vanguard fund first you should be able to switch in specie without time out of the market although it can take longer. I don't have an account with HL anymore but found you can still use the app watchlist to track investments on cheaper platforms. With the Fidelity Index World you are only getting developed world exposure so around 65% US which is looking expensive at the moment so you might choose to diversify with an emerging markets fund and perhaps some UK bias (which we do via an investment trust in our iWeb accounts because I value the dividend flow).

Just wondering; what is the thinking behind adding an emerging markets and a UK fund? 
Also I currently pay £500 a month into the Fidelity Index World, if I added another 2 funds what is the best way to split the contributions? As simply as £300 into Fidelity, £100 into emerging markets and £100 into UK? 

Alexland

chelseablue said:

Just wondering; what is the thinking behind adding an emerging markets and a UK fund?

Fidelity Index World doesn't include any material allocation to emerging markets so by adding it you are increasing diversification into new areas and reducing the US dominance. You could also consider some adding smaller caps for further diversification. The UK bias is debatable but basically valuations are looking more attractive and there are long periods in history where US listed companies and the growth style have under performed but people tend to forget that as it has done so well in the past decade. Around 10% emerging markets, 5% small caps and maybe up to 20% UK seems reasonable (although remember you have around 5% UK already in your existing developed world fund) but there is no right answer it's all down to judgement. If you do go with multiple funds don't forget to rebalance.

Something like the VLS100 or Vanguard Global All Cap funds could do the whole job for you depending on if you wanted the UK bias or not. Still they are more expensive than constructing the allocation yourself but the cost difference might not be material on smaller amounts.

Nurse2047

Hi can I ask re fidelity JISA charges as have read there is no service fee but there is a charge made for each buy and sell transaction you place (including switches and dividend reinvestments). This will be deducted from the amount invested or raised through a sale.
I am transferring a cash jisa- would vanguard or fidelity be cheaper? 

Alexland

MFW2026 said:

Hi can I ask re fidelity JISA charges as have read there is no service fee but there is a charge made for each buy and sell transaction you place (including switches and dividend reinvestments). This will be deducted from the amount invested or raised through a sale.

There are no trade or ongoing charges on Fidelity junior accounts if you stick with traditional UT / OEIC funds however they do charge for share dealing in ETFs, ITs or individual company shares. The full details on their website link below although they could be clearer that the share dealing charges do not apply to traditional funds because they are not shares. Fund managers might have dual pricing, dilution levies etc and that should be detailed on their various websites.

https://www.fidelity.co.uk/junior-isa/fees-and-charges/#tab-link

MFW2026 said:

I am transferring a cash jisa- would vanguard or fidelity be cheaper? 

Vanguard's 0.15% might be cheaper if you wanted to invest in a Vanguard ETF as you would be paying £10 trade fees etc with Fidelity for that type of investment. ETFs are market traded so you also have to consider the spread cost so stick to ones with good liquidity.

To optimise our Fidelity platform costs we hold traditional funds in the (free) child accounts and ETFs in our (capped) adult accounts.

chelseablue

Alexland said:

chelseablue said:

Just wondering; what is the thinking behind adding an emerging markets and a UK fund?

Fidelity Index World doesn't include any material allocation to emerging markets so by adding it you are increasing diversification into new areas and reducing the US dominance. You could also consider some adding smaller caps for further diversification. The UK bias is debatable but basically valuations are looking more attractive and there are long periods in history where US listed companies and the growth style have under performed but people tend to forget that as it has done so well in the past decade. Around 10% emerging markets, 5% small caps and maybe up to 20% UK seems reasonable (although remember you have around 5% UK already in your existing developed world fund) but there is no right answer it's all down to judgement. If you do go with multiple funds don't forget to rebalance.

Something like the VLS100 or Vanguard Global All Cap funds could do the whole job for you depending on if you wanted the UK bias or not. Still they are more expensive than constructing the allocation yourself but the cost difference might not be material on smaller amounts.

When you say 10% emerging, 20% UK etc do you mean as a percentage of the value of the portfolio? So if you had £5,000 invested the emerging markets fund should have around £500 in it? 

Also how do you rebalance? Is that just adjusting how much is in each fund to meet desired percentages?

Stupid questions I know

Alexland

chelseablue said:

When you say 10% emerging, 20% UK etc do you mean as a percentage of the value of the portfolio? So if you had £5,000 invested the emerging markets fund should have around £500 in it?

Yes if you decided to have a 10% weighting to Emerging Markets that was not in your main Developed World fund you would have £500 of your £5k invested in that EM fund.

It's a bit more complicated if you wanted 20% in the UK as you already have 5% UK in the Developed World fund so you might do 10% EM, 16% UK and 75% Developed World (inc 5% UK) and accept it's roughly what you wanted. Alternatively you can get 'Developed World ex-UK' funds from Vanguard, L&G, etc to keep all your home exposure in a dedicated UK fund.

chelseablue said:

Also how do you rebalance? Is that just adjusting how much is in each fund to meet desired percentages?

Yes over time the percentages would drift so you would sell some units in the fund that has grown more to buy some units in the one that has grown less. Alternatively you can weight your new contributions (depending on if they are big enough relative to the movement in existing assets) to achieve the desired balance on the new total value.

Still you have to decide if you can be bothered so on a smaller account like the £25 pm Junior SIPPs then I just accepted it was worth paying a higher OCF to have the Global All Cap fund as it's pennies anyway.