Kids ISAs dropping significantly - thoughts on next steps?

mroshaw

Hi! I'm looking for some thoughts and feedback about how I'm investing in my kid's futures, specifically, I'm concerned about the performance of my Child ISA investments.

Just to say up front, I am aware that the markets are tumultuous at present, and I'm very keen not to make any rash decisions. These are "long-term" investments for my kids. My worst fear, of course, is that the kids end up with less than they could have. Clearly, it's impossible to predict the future and I'm 100% clear that "investments may go up or down". I'm hoping for some thoughts and feedback on how I make the best of the cash we are lucky to have to invest.

I was very fortunate some years ago to sell a property and have cash "left over". I split that evenly between my two children and set aside ~31K each (~62K in total) to invest for their futures. Initially, I put it all into Premium Bonds, and over time moved some into NS&I ISAs.

Two years ago, I went through Hargreaves Lansdown and I opened two "Child ISA" accounts with them for each of my children. I selected the H&L "HL Portfolio+ Balanced Growth" managed fund, as a "medium risk" option, and I transferred around £13K from each of the existing NS&I ISAs. Over the last 2 years, I've been using the kids ISA allowance to add to that portfolio, £9000 per year taken out of their Premium Bonds.

My kids are now 8 and 11, so I'm looking at least 7 to 10 years into the future as to when they might need to access the money.

Looking at the summary of their accounts today, I see that on each of the two portfolios:

• Total invested since 01-Dec-2020: £31365.53
• Total Value as of 2-Nov-2022: £29244.17

So that's a drop of £2121.36 over the 2 years since I opened the H&L ISA accounts.

Any thoughts or feedback you can share? Should I just leave it, and hope that I regain my losses and more over the coming 7 to 10 years?

Many thanks in advance for any thoughts you can share!

dunstonh

. Clearly, it's impossible to predict the future and I'm 100% clear that "investments may go up or down"

Its not may.  It is "will go up and down".  

Looking at the summary of their accounts today, I see that on each of the two portfolios:

• Total invested since 01-Dec-2020: £31365.53

• Total Value as of 2-Nov-2022: £29244.17

So that's a drop of £2121.36 over the 2 years since I opened the H&L ISA accounts.

So, a very small drop in the scheme of things.  

Any thoughts or feedback you can share? Should I just leave it, and hope that I regain my losses and more over the coming 7 to 10 years?Investments doing what they do.   The expectation is for around 1 in 5 years to be a negative year  So, nothing unusual here.

You could pick better quality investment funds though.

steampowered

2 years is too short a time period to assess investment performance. Especially when those 2 years covered the COVID pandemic. 

If you had invested for any other 2 year period from 2010 onwards, the money would have grown significantly during that time. You are just unfortunate that the 2 years you happen to have been invested in covered a period of global pandemic; war in Ukraine; political instability and inflation. 

In any stock market investment, most years are good years; some years are flat; some years are bad. Over time the good years outweigh the bad. That's how it goes.

The average return historically generated by the stock markets is about 8% a year. Some years more; other years are a loss; some years less ... but the general average over time is 8% a year.

Given that you are looking at a 7-10 year investment horizon, you should absolutely leave the money invested. Between now and then there will be more drops along the way but there will also be lots of growth. 

eskbanker

A drop of under 7% over two years isn't anything to worry about if the money won't be needed for 7-10 years, stick with it.  Chances are the portfolio will have increased in the first year and fallen in the second year, so the drop over the last 12 months is actually likely to be more than 7%, but that sort of fluctuation should be expected when investing, which should have been clear when selecting these?

NoMore

" Clearly, it's impossible to predict the future and I'm 100% clear that "investments may go up or down" "

Clearly you don't understand this at all.

MX5huggy

You can’t control markets what you can control is fees you’re pay a platform fee of 0.45% and a fund fee of 1.28% this is a massive drag on performance. Find a cheap Multi Asset fund from Vanguard HSBC or iShares and transfer to Fidelity with no platform fee and fund fees of about 0.25% instead of paying over £500 per year per account you’ll be paying £150.

Albermarle

Just to say up front, I am aware that the markets are tumultuous at present,

Stock markets and bond prices are down significantly this year but situation seems to be stabilising., which may or may not continue .

Two years ago, I went through Hargreaves Lansdown and I opened two "Child ISA" accounts with them for each of my children. I selected the H&L "HL Portfolio+ Balanced Growth" managed fund,
You picked expensive options using HL as a platform (0.45%) and one of their managed funds (1.29%). So the total cost is 1.74%, which is pretty eye watering.
One of their main competitors, ( Fidelity) has a zero platform charge for JISA's and you could pick a standard low cost medium risk multi asset fund for around 0.2%. 
The HL fund has 70% equity and the Fidelity Multi allocator Adventurous also has 70% equity. The HL fund is down 11.2% in the last 12 months and the Fidelity one is down 6.9%
The main reason seems to be that the manager of the HL fund has been light on US equity, and the Fidelity fund has gained from the weak Pound boosting its US values.
Now as always 'past performance is no guide to future performance' but paying high fees is never a good idea.

mroshaw

Thank you all for the brilliant feedback! It's given me confidence to stick with it, and I'll definitely look at alternatives to H&L.

NoviceInvestor1

If you are referring to the fund;

HL MULTI-MANAGER BALANCED MANAGED TRUST 

Then I am sorry to say it looks an absolute pig of a fund.

Really expensive fund of funds, jam packed with terribly performing active funds. I can't believe they have £1bn of investors capital in this, incredible.

They are charging 1.74% according to a poster above (incl HL platform fees), and have returned 0.65% annualised over 5 years.

Vanguard Life Strategy 80 has a similar risk profile, charges 0.22% and has returned 5.25% annualised over the same period.

The HL fee is more than double the investment return!

There should be a sticky on this forum - IF YOU ARE CONSIDERING ONE OF HL's OWN FUNDS DO NOT DO IT 

mroshaw

Albermarle said:

Just to say up front, I am aware that the markets are tumultuous at present,

Stock markets and bond prices are down significantly this year but situation seems to be stabilising., which may or may not continue .

Two years ago, I went through Hargreaves Lansdown and I opened two "Child ISA" accounts with them for each of my children. I selected the H&L "HL Portfolio+ Balanced Growth" managed fund,
You picked expensive options using HL as a platform (0.45%) and one of their managed funds (1.29%). So the total cost is 1.74%, which is pretty eye watering.
One of their main competitors, ( Fidelity) has a zero platform charge for JISA's and you could pick a standard low cost medium risk multi asset fund for around 0.2%. 
The HL fund has 70% equity and the Fidelity Multi allocator Adventurous also has 70% equity. The HL fund is down 11.2% in the last 12 months and the Fidelity one is down 6.9%
The main reason seems to be that the manager of the HL fund has been light on US equity, and the Fidelity fund has gained from the weak Pound boosting its US values.
Now as always 'past performance is no guide to future performance' but paying high fees is never a good idea.

This has been super helpful, thank you! I've initiated a transfer of both the kid's accounts to Fidelity.

mroshaw

NoMore said:

" Clearly, it's impossible to predict the future and I'm 100% clear that "investments may go up or down" "

Clearly you don't understand this at all.

No need to be rude, is there? Why post responses like this on a forum that's dedicated to helping the general public save money? Why even belong to forums like this if you've got nothing positive to contribute?