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I have about £10k from grandparents which they would like invested in stocks and shares for my 19 year old daughter. We are looking at a 5 - 6 year time horizon i.e. that she would use the funds at that stage most likely to pay for higher education (postgraduate); otherwise would retain the funds for house deposit in due course.
Thus we want as far as possible to preserve the initial lump sum but with the possibility of some capital growth.
I am thinking of an ISA using FTSE 250 tracker - any suggestions as to ones which are low cost/easy to access (in terms of actually making the investment)? Or open to other suggestions?
Originally posted by Murdina
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1. 5-6 years really is too short a timeframe to be considering equities investments. There is a very high risk of her having less than the original capital sum at that point.
2. Investing in just the FTSE 250 is extremely limiting. If she does invest then a world index makes a lot more sense, and, personally, I would advocate a multi-asset fund, e.g. Vanguard LifeStrategy; HSBC Global Strategy; Blackrock Consensus; L&G Multi Index.
3. With investments, you cannot preserve the original capital. All the capital is at risk, which is why they are not suited to short term objectives, and 5-6 years is pretty short term.
The best option - if that really is the likely timeframe - is to avoid investments. If, however, it can be extended to at least 10 years, and preferably longer, then investing is a good idea, but some good research is needed into how investments work and the available options.
If using savings, then there is lots of good advice on this forum about the best way to maximise available rates.
It is a very generous gift from her grandparents; it would be a shame if it were to lose value at the critical point through a poorly thought out approach to investing.