Savings for Grandkids

[PaulBullet]

My father has provided some money (10K) to each of his grandchildren to fund an ISA.

He has also agreed to to match their savings of up to 50pm if they add to it.

I have been asked to invest the money for them, they are all between 20-24

I think overtime I would suggest to them a HYP where they pick the shares and make their own decisions, however my father wants the money invested now and their regular contributions put in the market so I am looking at IT's

I am considering splitting the money between CTY,MYI, HFEL and IPU in equal amounts. The first 3 have a HY feel to them and I think that the regular flow of income will appeal to them. IPU is a fund that the younger grandchildren are invested in their JISA's (aged 6-14)

Any thoughts?

Paul

Note: The money is set aside for buying a home/starting a business or funding an education. None of these events are likely in the next 5 years

[MaraMan]

I think most evidence (ducks for cover) shows HYP isn't the best style for long term growth if you don't need the income immediately. I would put it in a mixture of global growth funds/ITs, incl Fundsmith, SMT or Monks.

MM

[kempiejon]

I think overtime I would suggest to them a HYP where they pick the shares and make their own decisions, however my father wants the money invested now and their regular contributions put in the market so I am looking at IT'sI am considering splitting the money between CTY,MYI, HFEL and IPU in equal amounts. The first 3 have a HY feel to them and I think that the regular flow of income will appeal to them. IPU is a fund that the younger grandchildren are invested in their JISA's (aged 6-14)

CTY - The City of London Investment Trust
MYI - Murray International Trust
HFEL - Henderson Far East Income
IPU - Invesco Perp UK Smll Co Inv Trst

Paul,
I'd guess they'll run their own ISAs so you can only hope that they'll stick to your objectives? Could you involve them in the process now? I'd think a twenty year old could hold an opinion, even if it's just to try and understand your planning and why you suggest ITs for now and a HYP down the line, in fact is income a requirement at this stage?
I like HYPing but I'm soon going to draw an income. I have been turned back on to the idea of trackers, for "disinterested" investors for their low costs and just below average returns. A FTSE100 tracker like ishares ISF has annual costs of 0.07%, it would offer about 4% yield an income not to sniffed at if that's an objective. By their nature investment trusts might have a focus other than the recipients' and they inevitably attract costs. Don't most ITs hold back some of the income or profits for smoothing. ISF's 4% is not so far from the yield on MYI 4.5%, CTY 4.1%, IPU 3.3% though HFEL at 5.7% is the income winner. Do you expect them to reinvest the income or spend it? If it's a 10 year holding would an accumulator be more appropriate?
Internationally the Vanguard world etf (VWRL) shows a TR of about 12% annually over 3 and 5 years and fees of 0.25%. Does that compare to the TR or fee of those ITs? I hold both CTY and MYI as well as VWRL and I'm pretty over my holding times VWRL has beaten both on return and charges less.
I'd be interested to see some other suggestions too.

[Urbandreamer]

Paul,
I'd guess they'll run their own ISAs so you can only hope that they'll stick to your objectives? Could you involve them in the process now? I'd think a twenty year old could hold an opinion, even if it's just to try and understand your planning and why you suggest ITs for now and a HYP down the line, in fact is income a requirement at this stage?

Can I second that. I involved my 17 yearold in selecting IT's for her JISA (with I hope knowledgable input from me). I tried to involve my 13 yearold son, but he wasn't interested.

For the record we went for

SMT: Scottish mortgage.
CTY:.....

The son got the same.

SMT as she was interested in tech and growth and CTY as something less racy with a decent income to cover costs. As their JISA's are quite small they will need income to cover running costs.

Ps, while I hold HFEL myself it's not one that I would pick for a young person. What about that one attracted you?

[PaulBullet]

Yes they are expected to reinvest the income, added to this the matching 50pm this year (maybe more in future) stops if they don't save or withdraw the money so they are incentivized to save.

My preference for income is that its easy to see and normally its there even if the holding is down in value.

Without seeing the income you can sometimes not see the TR until 3-5 years in the future and I hope by then they will have taken full control of the investing and will have there own idea's. However if they have not they still have a simple portfolio that can be setup to auto invest in its constituents.

I will look at ISF and VWRL

HFEL - was to give some far east exposure

Paul

[tjh290633]

My inclination would be to point them towards one or more ITs, and I would include F&C (FRCL) and Witan (WTAN) in the mix. Both have a wide geographic spread and also some private equity.

TJH

[richfool]

My inclination would be to point them towards one or more ITs, and I would include F&C (FRCL) and Witan (WTAN) in the mix. Both have a wide geographic spread and also some private equity.

TJH

Yes, I too would have suggested more globally focussed IT's, such as FRCL & Witan (Global Growth sector), perhaps along with JPGI and/or MYI (Global Growth & Income sector). To cover the broadest range of sectors.

Disc: I hold all four.

[GJHarney]

You need to take into account costs and ease of use/access down the line for people that may not be investing anoraks. Many platforms will have high charges for smaller IT holdings and you pay highly for small dividend reinvestment (£1.50 is common, but if the amount is not high then that as a percentage term can be very large). Investing direct with IT's themselves can be better, but some also have platform costs and there can be a lack of good choice to have IT diversification.

Thankfully there is one IT in-house option with no or low platform charges, no dividend reinvestment charges easy/free fund switching (for re-balancing etc.), and a very good choice of very successful low cost IT's - Baille Gifford. You could balance Scottish Mortgage with Monks, and then also perhaps choose one of their Japan funds or something like Scottish American (income) or Edinburgh Worldwide (small cap growth).

Other similar options would be direct investments with Witan (easy choice of two funds) or F&C.

[moorfield]

Any thoughts?

Paul

Note: The money is set aside for buying a home/starting a business or funding an education. None of these events are likely in the next 5 years

Keep it Simple Simple Simple investing for kids. Time is on your side.

A dividend paying IT may require maintenance at least once a year (reinvesting dividends), if you want to be completely "hands off" consider an "accumulation unit" fund instead.

Another consideration. Use up your own Mr+Mrs ISA allowances first (let's face it - how many couples fill up the £40k available to them each year?).
We are deliberately keeping our hard-earned and gifted in our own ISAs in an earmarked fund. That's not being tight, it's just mitigating what I like to term "frivolity risk" which IMO coincidentally is at its greatest when control of JISAs is ceded....

[ADrunkenMarcus]

Make sure they also read John E. Newlands' report on 150 years invested in F&C. It illustrates the long term benefits and short term setbacks of investing and the principles apply to all long lived investment trusts:

https://t.co/AbJ9lPAo35

Best wishes

Mark.

[OhNoNotimAgain]

And don't even think about a low cost passive strategy that uses simple processes rather than relying on very clever people like;

http://www.thisismoney.co.uk/money/mark ... unges.html

and

http://www.thisismoney.co.uk/money/mark ... dford.html

who think they know exactly what is going to happen next

https://www.investopedia.com/articles/i ... rategy.asp

amd that compound interest is just so boring.