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Investment advice

Investment advice

My 2 infant daughters have just been given £500 each by their grandmother. Grandmother has said that she would like them to be able to access the money when they're 18. Where would you suggest I invest it on their behalf?

Many thanks in advance for all sensible suggestions!
Martin Smith

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15th Oct 2008 17:12

Not sure I agree
James - I invested in a similar fund trust monies for the benefit of grandchildren from their grandmother about 10 years ago and there has been NO growth at all in that period - for about the first 7 years pretty static, then an up and now of course a massive down. Standard advice has always been to invest in equities for the medium term but if you look at performance over the last 10 years, as well as the current outlook, I think one could be rightly be quite sceptical. I've certainly concluded that investing in equities is not as great as it is made out to be even over the longer period.

BS may indeed be eroded by inflation but there is still the interest and NO charges. We are only looking at £500 here - even minimal charges may take quite a chunk out of that.

Martin - comes back to your attitude to risk and how confident you feel about equities.

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15th Oct 2008 14:19

Foreign & Colonial Childrens Investment Plan
B/soc will get eroded by inflation over 18 years. F&C childrens investment plan has miniscule dealing and management charges and provides a free bare trust wrapper for you to hold the assets as bare trustee for children. Clearly there is an investment risk but the timescale is sufficient to mitigate it. Income and gains chargeable on child.

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15th Oct 2008 11:02

NSCs
I would go for NSCs or a building society account.

In terms of access, you will find that they will get that at 16. if it is a BS account, they will write and ask you or whoever is the co account holder/operator to arrange to transfer. I found it interesting when everyone got very excited about trusts giving access at 18 not 25 that no one ever seemed to point out that outside of trusts the kids can actually handle the money much earlier (and with some childrens' savings products incidentally you may find they can access them as young as 7 - so don't necessarily choose a children specific product).

With NSCs in theory same applies. However, if you take out a 5 year one and roll it forward to 5, then 10, then 15 & let it roll to 20 then it seems to be that you can in effect keep control of it a bit longer just by dint of the fact they will lose interest if they cash it in (& won't nec know about it till you tell them). (or jiggle around with one or two year bonds)

This is just based on my own experience with my children - I am not an investment adviser.

I would not go for shares notwithstanding the current climate unless you anticipate having a lot more money to add. Dealing costs and all that. Also in theory you stand as trustee of their money so if you lose it all they could sue you for not carrying out your duty of care properly! I don't think you could be faulted for NSCs/BS investments these days.

If you also invest for your children and your investments are likely to generate in excess of £100 pa income, then keep the grandparents' money in a separate account for ease of reference and tax returns!

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