Infofriday - How Children's Investments Have Performed

This week we take a look at investment options for children.

We have taken £1,000 invested in 2005 (launch of the Child Trust Fund) and looked at how investment options would have performed thorughout the following 10 years. 

 

 

 For comparability and simplicity we have assumed that the cash Junior ISA is invested in the best rate each year. Pre JISA we have used the best CTF cash rate. Transaction costs or other costs have not been included.

Stocks always beat cash

Despite the time horizon we used to compare the different investment options happened across one of the most serious financial crisis of all times, in the long run, we are still seeing much higher returns from shares than any other investment / saving option.

The key to maximise our children's returns by investing in shares is to keep transaction costs and management fees as a low as possible. 

1- Locking the money in an ISA or a mutual fund for as long as possible will minimise transaction costs and withdrawl fees.

2 - Buying low cost Exchange Traded Funds (ETFs) instead of conventional mutual funds will minimise management fees. These are funds that are traded daily on exchanges so they are easy to get in and out. They are the "no-brainer" product in asset management because there is no stock picking by any smart fund manager: the money is invested by buying the same shares in the same proportion of major indices. For instance a FTSE 100 ETF will replicate the composition of the top 100 companies trading in the FTSE.

If you believe, like we do, that in a long time horizon (10 years or more) the large majority (if not all!) of the mutual funds products will not beat the market, then this is a great option to maximise your stock market exposure. 

 
 

 

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