Monthly investment in S&S ISA for kids, what to invest in

K_S

AIUI, from the new tax-year I can open and contribute to multiple S&S ISAs in the same tax year.
We want to open an ISA (in our names, not JISAs) for each of our two kids, and make an unchanging monthly payment into it from now until they turn 18. If everything works as planned, each account will have £XX when the child is close to 18, which we could choose to use for a good reason (university for example) for them at the time or in the years hence. We'll probably use one of the free platforms like InvestEngine or T212, or a low % one like Vanguard as the pots will be modestly sized.
I'll use a compounded growth rate calculator to work backwards towards the monthly payment required for each child based on how many months from April until their 18th birthday, and the amount that I'll be aiming for. I hope all that makes sense!
Given that the 'term' of the investment will be at least 15 years, and that we would rather not have to tinker with anything in that period, and it wouldn't be a disaster if at 18 the pot was smaller than hoped, I would be grateful for any views on what kind of funds/ETFs might best serve the above purpose and what would be a conservative % growth rate (nominal) to assume for the calculator.
My initial thoughts were simply a 60-40 fund/ETF and a 5% nominal growth rate assumption. Or a target date fund that would end up in cash/cash-like by the target, though that seems like overly conservative perhaps.
Any comments are welcome!

george4064

In this situation and from what you’ve mentioned, I’d say you can afford to take a high level of risk. 

That would mean investing in a world equity tracker fund or ETF, which one exactly is down to you and which platform you go with.

Notepad_Phil

Personally with that timeframe I think you should go for a minimum of an 80/20 fund/etf and if it were me then a 100% global equity choice would be my choice.- something like the HSBC All World Index Accumulation or similar.

As to a growth rate, a nominal 5% is possibly in the right ball park, but a lot depends on what happens to inflation and I think you should just put in whatever you can comfortably put in and then perhaps increase it as years go by and your disposal income hopefully rises.

Perhaps when you get to within 5 years you may want to start to derisk the portfolio.

Albermarle

 Or a target date fund that would end up in cash/cash-like by the target, though that seems like overly conservative perhaps.

You would not really know the target date anyway. Things may have changed in 15 years,

Maybe one or both will not want to go to Uni, or go years later. What if one asks for the money to buy a motorbike to travel round the world with her Hells Angels boyfriend/girlfriend/gender neutral friend? Maybe you will want to hang on to the money for a few more years 

jamesd

Given the timeline you might consider a highly volatile mixture like 50% each in global smaller companies and emerging markets. These are likely to grow several percent faster than just global markets but an 80% drop wouldn't be unexpected.

As you enter the final five years you might switch new money to a 60:40 equity:bonds mix and depending on market conditions switch the starting two.

K_S

Thanks all for your comments, much appreciated!

Will probably just put everything in a large global equity tracker fund/etf, leave it undisturbed while contributing to it and a few years prior to the 'target', take a peek and move if it looks appropriate.

For the calculations to arrive at a fixed monthly contribution that delivers the desired sized pot in x years, I'll use a growth assumption of 5% nominal which (hopefully) should be pretty conservative considering historical long-term returns from equity.

hewhohuntselves

Hello.  If you are looking for a solid and low-cost global (i.e. developed and emerging) ETF, you could consider something like iShares MSCI ACWI UCITS ETF USD (Acc) GBP.  I suggest it as the HSBC fund outlined above is not an ETF.  

If you want a developed-only ETF (which would not be an unreasonable choice, despite what some on here will tell you), you could consider Vanguard FTSE Developed World.  If you want a global ETF with a bit of small-cap thrown in, you could consider Vanguard FTSE All-World (Acc).  

My own preference is for the slightly cheaper iShares ETF.  I’m adding £££ p/m into it for my young daughter. 

Whatever you do, make sure you buy the GBP and accumulating versions of the fund you pick (and, given that there are non-ETF versions of some funds with similar names, make sure you buy the ETF!). 

I would be slightly cautious about using IE or T212. While they are very cheap and regulated, they do not have a long-term track record.  Somewhere more established like AJ Bell, which caps its 0.25% ETF fees at £3.50 p/m, could be a better option.  It also has an affordable regular investing service where you can buy ETFs for £1.50 per trade.  They don’t do fractional shares though.