Long term investing for a beginner

Monkey_B

Hi,

I want to start putting aside a relatively small monthly amount (~£50 to start with) for my kids to use in probably 15 - 20 years' time.

As it's such a long term saving goal, I am leaning towards investing. I have very little experience in investing, and am really only interested in something that will be minimal effort. Having read through the MSE guide, and doing a little bit of research, I am leaning towards using the Interactive Investor platform to invest in one of their recommended "quick-start" funds for beginners.

The 6 funds are essentially split in to 3 active funds and 3 passive funds, with a cautious, balanced, and adventurous option in each group.

I'd be interested in peoples' opinions on which would you would go for, with my goals in mind. My current thinking is to start with the most adventurous of the 3 active funds, to hopefully get as much growth as possible while there is little in the pot to risk. Then in maybe 5 years' time, move to something more balanced, and for the last 5 years go to the most cautious. Does that sound like a reasonable strategy?

Thanks

AlanP_2

Will this be in a JISA, held in your children's names?

I don't know if ii offer those, so worth checking.

An alternative, low platform fee option, would be Vanguard. Given you are looking at 15+ years time (that assumes your kids are about 3 years old, as at 18 they can do what they want with "their" money) I would be looking at 100% equities, well diversified e.g. Vanguard Global All Cap or similar.

I realise that like many you prefer minimal effort but it's worth having a bit of knowledge about these things, you probably have a pension or similar that is invested. The monevator website is a good starting point in the quest for knowledge.

Albermarle

II has a flat fee charging structure. This means you get charged the same however much money you have on the platform. So great for large sums, but not for smaller sums.

You would be better with a platform with a % charging structure. Vanguard has already been mentioned, or if you want to invest via a JISA, Fidelity is often recommended as they have a zero platform fee for JISA's.

Junior ISA | Invest in a Junior Stocks and Shares ISA | Fidelity

tacpot12

The Interactive Investor portfolios are likely to be ok. I would go with the most Adventerous Active portfolio, and take a look in 10 years time (rather than five) and move to the Cautious portfolio only if the Adventerous portolio has done really well, e.g. it has returned more than say 6% per year. Your strategy is basically sound. 

When investing in small amounts, the level of charges becomes even more important (it's actually just about the most important aspect of investing, IMHO). Check the charges carefully, and look to see if Vanguard can beat the charges at II. 

The most important thing is to do something! Start investing this month. Set youself a deadline of the end of this week to figure out if Vanguard has lower costs or not, and then get accounts setup by end of the  month. The sooner you start, the  sooner your children will benefit. 

I would also recommend involving your children in reviewing 'their' investments. The sooner they learn about the value of long term investing the better.   

Monkey_B

Thanks Alan.

My intention was to keep it all in my name, as I know how much of an idiot I was at 18, so don't want them receiving a pile of cash at that age to do whatever they want with! Obviously have no idea how things will pan out, but in my mind the money will be for a house deposit or cash to get them through uni, which I will pass on at my discretion depending on whether they are as daft as I was (if they are, they might not see any cash from me until they are in their 30s)!

As far as I can tell, the advantages of a JISA are around tax. Again, I'm no expert, but I was kind of hoping that if I put £50 - £150 per month in a S&S ISA, it wouldn't be enough to have any impact on personal savings tax..?

I think the suggestion of a 100% equities fund is an endorsement of the idea of choosing something "adventurous" at least to start with? What are your thoughts on shifting to lower risk options over time?

Monkey_B

Thanks Albermarle and tacpot12. I hadn't spotted the point about ii having a flat platform fee. I will definitely check out Vanguard, as all three replies have suggested!

Brie

Looking for the easiest answer .... I know you could set up a standing order to push money to whatever platform.  Does Vanguard allow you to then automate to go into a set fund so you never have to think about it if you are busy?

AlanP_2

Monkey_B said:

Thanks Alan.

My intention was to keep it all in my name, as I know how much of an idiot I was at 18, so don't want them receiving a pile of cash at that age to do whatever they want with! Obviously have no idea how things will pan out, but in my mind the money will be for a house deposit or cash to get them through uni, which I will pass on at my discretion depending on whether they are as daft as I was (if they are, they might not see any cash from me until they are in their 30s)!

Fair enough as long as you realise that as far as Tax Man, Debtors etc may be a factor it will be an "asset" of yours and so up for grabs if the worst happens.

As far as I can tell, the advantages of a JISA are around tax. Again, I'm no expert, but I was kind of hoping that if I put £50 - £150 per month in a S&S ISA, it wouldn't be enough to have any impact on personal savings tax..?

It's about tax as you say and you are unlikely to have a problem at that level of investment but who knows what will happen in the future? My view is put as much as you can inside a tax wrapper just in case.

I think the suggestion of a 100% equities fund is an endorsement of the idea of choosing something "adventurous" at least to start with? What are your thoughts on shifting to lower risk options over time?

That depends on whether these is a "hard date" to worry about. If targeting Uni then there is. Adventurous / 100% equity may or may not be the same thing depending on specific products.

Answers in inline above.

Eyeful

You state you have very little experience and you want to invest with minimal effort. This suggests to me following the simplest  investment strategy possible on a platform of your choice. 

I suggest you first  watch this
(a)  https://www.kroijer.com/

(b) Consider : 
https://monevator.com/best-global-tracker-funds/
or
(c)  if you want less risk:
https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds?intcmpgn=lifestrategyfunds_learnmore_link
https://www.hsbc.co.uk/investments/isas/hsbc-global-strategy-portfolios/#balanced

Albermarle

As far as I can tell, the advantages of a JISA are around tax. Again, I'm no expert, but I was kind of hoping that if I put £50 - £150 per month in a S&S ISA, it wouldn't be enough to have any impact on personal savings tax..?

Just for clarity.

You have a 'Personal Savings allowance' (£1000 for a basic rate taxpayer) that means you can earn up to £1000 in interest on savings, without paying tax. This is in addition to any savings interest gained in a Cash ISA, where no tax is applicable.

For Investing (different to saving) there are also allowances for Capital Gains and Dividend tax . However these only affect investments outside  a S&S ISA ,as within the ISA there is no tax to pay at all.

There is a limit of £20K pa on how much in total you can add to any ISA's in any tax year ( to restrict overuse of their tax free status) 

MX5huggy

Brie said:

Looking for the easiest answer .... I know you could set up a standing order to push money to whatever platform.  Does Vanguard allow you to then automate to go into a set fund so you never have to think about it if you are busy?

Yes, I do this with VG I would expect and platform would.  I would avoid ETF’s stick to Funds because you can’t buy fractions of  ETF units.