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    • Murdina
    • By Murdina 11th Jul 18, 2:49 PM
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    Murdina
    Stocks and shares ISA - suggestions for 19 year old
    • #1
    • 11th Jul 18, 2:49 PM
    Stocks and shares ISA - suggestions for 19 year old 11th Jul 18 at 2:49 PM
    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?
Page 1
    • Economic
    • By Economic 11th Jul 18, 3:42 PM
    • 264 Posts
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    Economic
    • #2
    • 11th Jul 18, 3:42 PM
    • #2
    • 11th Jul 18, 3:42 PM
    Why track a UK index? You want to diversify so track a global index such as the MSCI World.
    • bostonerimus
    • By bostonerimus 11th Jul 18, 4:00 PM
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    bostonerimus
    • #3
    • 11th Jul 18, 4:00 PM
    • #3
    • 11th Jul 18, 4:00 PM
    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
    A FTSE 250 tracker does not give you any guarantee to preserve the initial lump sum. An equity investment will probably give you some dividends and also the chance of capital appreciation, but your desire to protect principal would be met in a cash ISA.

    However, if I had a 19 year old child in the situation you describe I would advise they put the money into a mulit-asset fund with a high percentage of equities.....something like VLS100....and then make additional contributions on a regular basis as a high priority on a detailed budget that they create.
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    • msallen
    • By msallen 11th Jul 18, 4:00 PM
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    msallen
    • #4
    • 11th Jul 18, 4:00 PM
    • #4
    • 11th Jul 18, 4:00 PM
    I'm not sure investing the right option here. Surely if she's 19 then post-grad studies will likely start in about 3 years. Even if it is 5-6 that's borderline really for equities.
    • Murdina
    • By Murdina 11th Jul 18, 5:30 PM
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    Murdina
    • #5
    • 11th Jul 18, 5:30 PM
    • #5
    • 11th Jul 18, 5:30 PM
    Thank you to all. [I do know by the way the earliest date when the post grad studies for which the funds are potentially required will start!]
    There is no possibility of adding to the investment. It is a one off payment.

    Any other suggestions much appreciated.
    • xylophone
    • By xylophone 11th Jul 18, 5:30 PM
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    xylophone
    • #6
    • 11th Jul 18, 5:30 PM
    • #6
    • 11th Jul 18, 5:30 PM
    5-6 years is rather short term for equities.

    She might use 4000 in a LISA.

    https://www.skipton.co.uk/savings/isas/cash-lifetime-isa

    Deposit accounts here

    http://www.thisismoney.co.uk/money/article-1621507/Best-savings-rates-Fixed-rate-accounts.html

    Otherwise, she might consider a stocks and shares ISA with Vanguard.

    https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

    http://monevator.com/using-vanguard-lifestrategy-funds-life/
    • enthusiasticsaver
    • By enthusiasticsaver 11th Jul 18, 5:39 PM
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    enthusiasticsaver
    • #7
    • 11th Jul 18, 5:39 PM
    • #7
    • 11th Jul 18, 5:39 PM
    Investing just in equities over a 5 to 6 year frame only using a UK tracker index is unwise and likely to be volatile. To minimise risk you should diversify globally so not only investing in UK but worldwide. I also like to diversify even further by investing in multi asset funds so using bonds as well as equities which tend to be less risky. The Vanguard lifestrategy funds are popular, I use the Vanguard LS 60 myself which is 40% bonds and 60% equities. All invested globally. Whether there would be a massive return though in 5 years is uncertain and there is always the chance that the markets may be low when you need to access it. Is there a reason the grandparents are asking for it to be invested and do they know the money is earmarked for post grad study or house deposit?
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    • steampowered
    • By steampowered 11th Jul 18, 7:44 PM
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    steampowered
    • #8
    • 11th Jul 18, 7:44 PM
    • #8
    • 11th Jul 18, 7:44 PM
    Given that the average age of a first time buyer is 30 (or 32 in London), the potential investment term could be as long as 11 years.

    I would say that a stocks & shares investment through a low cost fund such as Vanguard is very sensible.
    • kidmugsy
    • By kidmugsy 11th Jul 18, 10:21 PM
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    kidmugsy
    • #9
    • 11th Jul 18, 10:21 PM
    • #9
    • 11th Jul 18, 10:21 PM
    LISA. Help to buy ISA. LISA could be in S&S if the grandparents insist.

    The LISA, however, is not suitable for paying for education.

    P.S. How much should she expect a one year postgrad course to cost?
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    • ValiantSon
    • By ValiantSon 12th Jul 18, 1:01 AM
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    ValiantSon
    Given that the average age of a first time buyer is 30 (or 32 in London), the potential investment term could be as long as 11 years.

    I would say that a stocks & shares investment through a low cost fund such as Vanguard is very sensible.
    Originally posted by steampowered
    Not on a 5-6 year timescale! It is a high risk strategy. You keep making these kind of comments without caveat and without any attempt to gauge attitude to risk!

    Average age is utterly irrelevant! You do understand what an average is, don't you? It refers either to the arithmetic mean, median or mode. Mean is calculated by adding up all of the ages and dividing by the number of instances. Median is simply the middle point. Mode is the most frequently occurring number. When people talk about averages in everyday life they are normally referring to the mean. A mean takes into account all of the ages, but doesn't tell us about the spread of ages, and disguises the fact that half of the sample are actually younger than that and half are older. More to the point, averages tell us almost nothing about individual circumstances. I bought my first house at 22 - well below the average - could I have done the same thing now? Yes.

    You have also ignored the fact that the most likely use of this money is to fund postgraduate study, so house purchase is not of primary relevance.
    Last edited by ValiantSon; 12-07-2018 at 1:10 AM.
    • ValiantSon
    • By ValiantSon 12th Jul 18, 1:20 AM
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    ValiantSon
    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
    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.
    • EJS_Superted
    • By EJS_Superted 12th Jul 18, 2:21 AM
    • 67 Posts
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    EJS_Superted
    The postgrad timescale is slightly awkward to work with. 5-6 years is not really long enough for investing to be safe option but keeping money in savings accounts for that long is likely to result in a small loss when inflation is accounted for. What about a mixture of savings and the low risk investments that have been suggested? Its a solution that guarantees unspectacular results but given the context might be appropriate. Savings rates seem to be slowly moving in the right direction so now might not be a bad time to have a foot in both camps.


    What are your daughters feelings?
    • Reed_Richards
    • By Reed_Richards 12th Jul 18, 8:16 AM
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    Reed_Richards
    I was about to agree with everybody else that 5-6 years was too short a timescale for a stocks and shares investment but I took a look at the FTSE 250 index and I can see why you chose that. It has been less volatile than the FTSE 100 and unless you had invested in May 2007 and got out in May 2012 I cannot find a 5 year time period since 1998 where you would have lost money and there are many where you would have made good gains.
    Reed
    • lpgm
    • By lpgm 12th Jul 18, 9:23 AM
    • 231 Posts
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    lpgm
    ...unless you had invested in May 2007 and got out in May 2012 I cannot find a 5 year time period since 1998 where you would have lost money and there are many where you would have made good gains.
    Originally posted by Reed_Richards
    But of course the problem is that all the years you mention are in the past.
    • Reed_Richards
    • By Reed_Richards 12th Jul 18, 9:33 AM
    • 93 Posts
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    Reed_Richards
    But of course the problem is that all the years you mention are in the past.
    Originally posted by lpgm
    Yes indeed, all the usual caveats apply. But isn't the whole rationale for investing in stocks and shares based on past performance?
    Reed
    • lpgm
    • By lpgm 12th Jul 18, 10:22 AM
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    lpgm
    Long-term trend, rather than periods of past performance. And in this case we're talking about quite a short period.
    • cloud_dog
    • By cloud_dog 12th Jul 18, 10:34 AM
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    cloud_dog
    OP, you could hedge your bets and go 50/50, in S&S ISA and cash (accepting all the caveats around long(ish) term cash and short(ish) term investments).

    For the investment, I would be tempted to select a low cost global all cap equity fund (but that's just me).
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    • Murdina
    • By Murdina 12th Jul 18, 8:46 PM
    • 417 Posts
    • 188 Thanks
    Murdina
    Many thanks to all for your helpful comments.

    As noted above, the time horizon is difficult - we are between a rock and a hard place - if we invest in cash there is negligible return - equities carries the chance of capital appreciation but also a risk which might be mitigated if the time horizon were longer - and if she decided not to do post grad work (this is in essence the earliest point at which she might want to use the money) then we might regret not having put into equities.
    The fact there is no consensus above is in a way reassuring as it reflects my own maybe this maybe that thought process on the topic.

    I shall reflect further.
    Last edited by Murdina; 12-07-2018 at 8:51 PM.
    • steampowered
    • By steampowered 12th Jul 18, 11:22 PM
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    steampowered
    In reality, what is the risk of funds losing value when invested over a 5-6 year period with dividends reinvested?

    Of course there is a risk of that happening, but it is certainly far less than 50%.

    And if the funds were held in cash, there would be a 100% chance of that cash being eroded over time by inflation.

    I would suggest that if the money is to be used for unknown purposes and held for an unknown period - which is likely to be at least a few years - an equity investment is a good idea.

    Obviously this is not a 'risk free' approach but nothing in life is risk free. Your daughter will certainly face bigger risks in starting off her adult life than the possibility that some money invested for her by her grandmother might go through a bit of market volatility.
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