Junior Stocks and Shares ISA - Are they still worth it? HELP

kimbowo

I am looking to invest in a junior ISA for my 1 year old daughter. I have done a little research, but find some information conflicting and the charges very confusing. 
Basically, I would like to invest approx £500 initially and then contribute £50-100 per month so I would be looking for a JISA that is beneficial for small monthly investments.
I have read in some threads that a cash ISA doesn't return above inflation, so I would basically be losing money - other threads have been saying that for a small investment the charges and nowadays low returns of stocks and share ISAs don't make it worth it and actually perform worse than a cash ISA. Can someone shed some light on this?
This will be a long-term investment and I do not need access to withdraw any of it anytime soon, which I am guessing would lend itself more towards a stocks and shares JISA. There seem to be a lot of providers with various rates - any recommendations for the above scenario? I would like it managed for me, as I just don't know enough above the stock market. 
Also, when she turns 18 I read that it will be automatically turned into a adult ISA - does that mean a cash ISA?
TIA

xylophone

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

You are not confined to only a cash JISA or  only a stocks and shares JISA although this would be  perfectly possible.

A parent might choose to open both a cash JISA and a stocks and shares JISA and split the contributions between the two.

At the moment, (and indeed for some time past) the cash JISAs offered by some financial institutions  offer an interest rate higher than inflation - see 
https://www.thisismoney.co.uk/money/saving/article-1583863/Best-savings-rates-Junior-Isas-children-s-accounts.html

That said, over eighteen years a stock market based investment may offer better returns.

The Fidelity Junior ISA has received favourable mentions on the boards.
https://www.fidelity.co.uk/junior-isa/

A multi asset index fund might well suit your purpose.

https://www.elstonsolutions.co.uk/insights/which-multi-asset-index-fund

https://monevator.com/low-cost-index-trackers/

Remember that the accounts belong to the child who may manage the accounts from age 16 and has the absolute right to access and control at age 18 when the account matures.

When a cash JISA matures it becomes a cash ISA and when a stocks and shares JISA matures it becomes a stocks and shares ISA.

dunstonh

other threads have been saying that for a small investment the charges and nowadays low returns of stocks and share ISAs don't make it worth it and actually perform worse than a cash ISA. Can someone shed some light on this?

That would suggest someone is talking about to their backsides.   Modern investing typically charge on percentages.   Not fixed monetary amounts.  So, a charge of 0.5% p.a. would be 0.5% whether its £100 or  £100,000. 

Also, when she turns 18 I read that it will be automatically turned into a adult ISA - does that mean a cash ISA?

No. It will become an S&S ISA.

eskbanker

kimbowo said:

other threads have been saying that for a small investment the charges and nowadays low returns of stocks and share ISAs don't make it worth it and actually perform worse than a cash ISA. Can someone shed some light on this?

Do you have any links to such threads?  I'm hazarding a guess that you may have misinterpreted a valid point about dealing costs, in that some newbie investors have fallen into the trap of buying £20 worth of shares but paying £10 as a fixed dealing fee, which clearly makes no financial sense.  However, it's quite possible to invest a small lump sum in £500 territory and monthly top-ups of £50-100 without charges eroding too much of your money - some providers will offer regular investing plans at minimal cost, some will charge nothing for fund purchases, or you might find it cost-effective to batch up cash before investing.

As for the comment about 'nowadays low returns' not being worth it, I have no idea where you'll have read that - it obviously depends on exactly what you invest in but there are plenty of low-cost well-diversified options that would be expected to deliver very healthy returns over 17 years, including those mentioned in earlier posts....

Albermarle

other threads have been saying that for a small investment the charges and nowadays low returns of stocks and share ISAs don't make it worth it and actually perform worse than a cash ISA

If you have read these comments on this forum, you must have misunderstood what was being said.

Returns on stocks and shares investments have been very healthy for around 11 years now . There have been some rocky periods but overall it has been good . Of course this is not guaranteed to happen in future but if over 17 years a S&S ISA would be expected to significantly outperform a cash ISA.

As suggested above a low cost multi asset fund with an annual charge around 0.25% in a Fidelity JISA ( which is free ) could be a good start.

kuratowski

Perhaps you saw some threads related to older children (e.g. aged 13 or over).  If the child is going to use the money in < 5 years time then it would prompt a discussion around whether investing is worthwhile vs cash.  But for your 1 year old daughter things are quite different.

kimbowo

Thanks all - this is all really helpful. I am a bit of a novice to this all, so it is quite possible that I have misinterpreted some information. I just want to make sure I am making the best possible investment for my daughter with the information that I have. 
I will have a look at Fidelity and potentially also open a cash ISA for family to contribute as to not put all my eggs in one basket. 
Many thanks!

md258

One other option would be to put your £50-£100 into a children's regular saver and then transfer the amount across once a year when it matures. The interest rates on children's regular savers are significantly better than adult ones but only you (or hindsight) can decide if you'd rather have x% guaranteed for a year or an investment.

kimbowo

I had a look at Fidelty and it is not really managed for me. Looks like I have to pick funds myself and I really do not know enough about them. Does anyone have any other suggestions for managed accounts? 
I had a look at wealthify, but the fees seem to be quite high in comparison to Fidelty. 

eskbanker

kimbowo said:

I had a look at Fidelty and it is not really managed for me. Looks like I have to pick funds myself and I really do not know enough about them. Does anyone have any other suggestions for managed accounts? 
I had a look at wealthify, but the fees seem to be quite high in comparison to Fidelty. 

https://moneytothemasses.com/quick-savings/parents/best-junior-stocks-and-shares-isa has a summary of options, but it shouldn't be a surprise that if you want someone to manage something for you then you'll need to be prepared to pay for that service!

kimbowo

I had a look at the above website and the only provider that clearly state the account will be managed is wealthify. Again, lots of different charges and offers and as a novice this is just really confusing as I do not know what half of it means.
I am happy to pay extra for the service to be provided, but was just wondering if anyone has any other recommendations before investing my hard earned pennies for 18 years with the first provider I can find. 

Thanks