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Investing £10,000 for a young child
BranwenW
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I am looking for some advice on how to invest £10,000 for my grandchild. So far, I have looked a JISAs but the Royal Mint's Little Treasures also looks appealing. I'm not the best at investing myself, so have no idea where to start. I know that with a JISA, the money will become my Grandchild's at 18 years of age, in comparison to the Little Treasures which I can gift whenever I decide. Does anyone have any other low risk suggestions please or any pros and cons to the JISA and Little Treasures. Is buying gold bullion an option?
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If you gift the money to the child whether inside or outside a JISA, he immediately becomes the beneficial owner of the funds.
If you would prefer to be able to make a gift at the time of your choosing, you might prefer to use your own ISA allowance, consider a global multi asset fund and make the gift when you consider him/her responsible enough to use it wisely.
One of the Vanguard Life Strategy funds might suit.
https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa
Personally I'd invest in a global high equity multi asset fund within a Stocks and Shares ISA in my own name and then add to this as future grandchildren arrive. Over an 18 year period this in my opinion is likely to result in a much greater resulting sum then simply putting the money into savings (which could be heavily hit by inflation), and the passing over of the money invested can be done when it's felt best to, rather than simply handed over at age 18 which would happen if you put it into a JISA in their name.
If you did do this then you'd need put the details in your will and funds like Vanguard Life Strategy 80% Equity or HSBC Global Strategy Dynamic would not be ridiculous choices for a 18 year investment period.
Previous posters have suggested that it would be better to invest in higher risk investments, due to the long time period involved.
Just to explain that in this context, which is investing in mainstream diversified funds ( means funds containing many different stocks and shares) , high risk does not mean risk of losing everything. It means that in the short to medium term the value of the funds could well go up and down a lot.
However in the long term the trend has always been up and the 'higher risk' the fund, the more growth in the long term and 18 years is certainly long term.
It's also very expensive for what it is at 0.6% per year - a DIY diversified investment could cost half that or less while doing much more.
That means the returns on the investment will track the performance of the global stock markets.
It also means your risk is diversified since you are getting the average performance of the entire stock market - not just the performance of one or two companies.
While the stock markets regularly go up and down, they generate a good return. Since the second world war the average return generated by the major stock markets has been pretty consistent across economic cycles at about 7.5% per year.
As the money will be invested for 18 years, that covers multiple economic cycles and gives plenty of time to average out the ups and downs of the stock markets.
The OP could open a "bare trust account" which they could manage themselves. Bare trust accounts are not tax-free and are taxable in the name of the child, but in practice very few children would have to pay tax on an investment of £10,000.
Bare trusts now have to be registered on HMRC's trust register which creates an extra bit of hassle, so it depends how much the OP wants to do the job themselves rather than one of the parents.