Any tips for long term investment?

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Anyone got any tips for putting something aside to build a financial pot for a new born so they have a little something to help them when they come of age?

I'm thinking of something to drop money in if it comes available rather than a regular payment, but that could be accessed if the parents needed it in an emergency.

Currently looking to just add a savings account to the mothers Savings account and just use that.
 

PK99

Legendary Member
Location
SW19
Anyone got any tips for putting something aside to build a financial pot for a new born so they have a little something to help them when they come of age?

I'm thinking of something to drop money in if it comes available rather than a regular payment, but that could be accessed if the parents needed it in an emergency.

Currently looking to just add a savings account to the mothers Savings account and just use that.

My wife was adopted in 1957. Her adoptive grandfather died a few months later and left her a small pot of shares. That pot was left to grow untouched (but managed by a broker) for many years.

Average long term stock market investment returns are 7-10% pa

Do the sums.
 
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ClichéGuevara

ClichéGuevara

Legendary Member
My wife was adopted in 1957. Her adoptive grandfather died a few months later and left her a small pot of shares. That pot was left to grow untouched (but managed by a broker) for many years.

Average long term stock market investment returns are 7-10% pa

Do the sums.

Worth a thought, but I guess I'd need to find a decent broker.
 

slowmotion

Quite dreadful
Location
lost somewhere
Worth a thought, but I guess I'd need to find a decent broker.

Here's how the FTSE has performed since 1984.

https://www.google.com/search?client=firefox-b-d&q=FTSE+100+over+last+30+years
(Press the "Max" tab above the graph to get it)
About a sixfold increase in value. In that period of time, inflation has been about 300%. It's not very exciting, but it looks like you could do an awful lot worse than buy a low-fees FTSE tracker and keep it for a few decades.
 
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PaulSB

Legendary Member
The investment we are making for our granddaughter is much longer term than you are considering. We have set up a pension for her into which we can pay a maximum of £2880 pa. Our payments are treated as taxable income and £720 is paid to the fund by HMRC giving immediate growth of 25% for that year.

The pension will be accessible from age 55.
 

Jameshow

Veteran
Junior ISA?

https://www.money.co.uk/savings-acc...lRkQvssvDY4RS5CtInPGf9Jvj5n-6D7EaAlZlEALw_wcB

Not as beneficial as child trust funds were.
Our kids have approx £6k each. ...
 

PK99

Legendary Member
Location
SW19
Good morning,

Here's how the FTSE has performed since 1984.

https://www.google.com/search?client=firefox-b-d&q=FTSE+100+over+last+30+years
(Press the "Max" tab above the graph to get it)
About a sixfold increase in value. In that period of time, inflation has been about 300%. It's not very exciting, but it looks like you could do an awful lot worse than buy a low-fees FTSE tracker and keep it for a few decades.
Careful, you may be falling victim to a little misunderstanding here. :smile:

The FTSE 100 index is a statistical thing not something that you can buy and sell, although you can buy into FTSE 100 tracker funds.

It is technically possible for the FTSE100 to remain stable and for a tracker fund to lose all of its money!

Periodically the constituent companies' market caps are rechecked and a few companies are dropped from the index and are replaced by the now most valuable.

This means that tracker funds must sell that share and possibly takes a loss on that share as it is selling into a market where other funds are also selling and buy the replacement share again at a time where other funds are also buying.

Tracker funds generally do not exactly track the index, a tracker fund will normally buy all the shares in an index, but it will not simply say there are 100 companies in the FTSE 100 index and you have £100 so it will invest £1 in each company.

Instead it might say company 1 is worth twice company 2 so the tracker will by twice as many shares in company 1.

If you had a FTSE 100 tracker this would mean that roughly half of your money would be invested in about 12 companies (May 2019), the other half in the remaining 88 companies.

This weighting brings some undesirable side effects, such as the biggest companies tend to be in a few market sectors, Oil and Pharmaceuticals.

So if you imagined that your tracker gave you a diverse portfolio of 100 companies the reality could be 20% in oil and 20% in drugs.

Recognising this risk there are the so called "Smart Trackers" that use various strategies to remove market sector and company size weighting.

Once you do this it is no longer just a tracker and the weighting may result in significantly better or worse performance than a simple tracker.

Trackers tend to be low cost as they can be operated automatically and the market for them is reasonably competitive. The only issue is that it can be difficult in practical terms to work out what these fees will be as there are different way of presenting them, but generally expect them to be in the range of 0.2% to 1%.

Note in big bold letters that this is 1% of the investment not 1% of the profit.

Looing at a couple of periods;

Period 1 - The FTSE 100 started the year 2000 at around 6,100 and on the 18th April 2019 is at 7,437, this is a growth of 21% over 19 years.

Period 2 - The FTSE 100 on the 6th April 1984 was at 1,096 and at year 2000 was around 6,100, this is a growth of 450% over 14 years.

During period 1 you would have lost out heavily to inflation in terms of your capital, most of your dividends would be needed to offset this loss.

Period 2 is much nicer, but is it repeatable?

I have used 2019 a couple of times as it is a completely pre covid date (and some of this comes from work I have done previously).

Investment companies love to use long term charts, as well as being easy to "prove" things with, everybody involved will have long moved on when when the long term period has expired and the promised results don't appear.

Remember the endowment mortgage and the lovely quote “There is a big difference between real mis-selling and compliant advice, where performance has not met the return assumptions." 2005 - Mark Chilton, chief executive of Purely Mortgages

Edit 04:35
By the way if you put 5k into Barclays bank in 2000 and reinvested your dividends

1662780882325.png


Ouch!

Share Dividend Num New
Pot Pot Qty of Price Dividend Amount Per Dividend Shares
Cost Value Profit Shares Pence Date Share(p) Amount(p) Bought

£4,998 £4,998 899 556
£4,998 £3,811 -£1,187 899 424 Aug-02 6.35 5708 13
£5,055 £3,184 -£1,871 912 349 Feb-03 12 10949 31
£5,165 £4,322 -£842 944 458 Aug-03 7.05 6653 15
£5,231 £4,629 -£603 958 483 Feb-04 13.45 12889 27
£5,360 £5,112 -£248 985 519 Aug-04 8.25 8126 16
£5,441 £6,064 £623 1001 606 Feb-05 15.75 15760 26
£5,599 £6,037 £438 1027 588 Aug-05 9.2 9445 16
£5,693 £6,402 £709 1043 614 Mar-06 17.4 18143 30
£5,875 £6,809 £934 1072 635 Aug-06 10.5 11259 18
£5,987 £8,611 £2,623 1090 790 Mar-07 20.5 22344 28
£6,211 £6,833 £622 1118 611 Aug-07 11.5 12860 21
£6,339 £5,571 -£768 1139 489 Mar-08 22.5 25634 52
£6,596 £4,362 -£2,234 1192 366 Aug-08 11.5 13705 37
£6,733 £3,933 -£2,799 1229 320 Nov-09 1 1229 4
£6,745 £3,317 -£3,428 1233 269 Feb-10 1.5 1850 7
£6,764 £4,191 -£2,573 1240 338 May-10 1 1240 4
£6,776 £3,668 -£3,107 1244 295 Aug-10 1 1244 4
£6,788 £3,419 -£3,369 1248 274 Nov-10 1 1248 5
£6,801 £3,895 -£2,906 1252 311 Feb-11 2.5 3131 10
£6,832 £3,800 -£3,032 1262 301 May-11 1 1262 4
£6,845 £2,824 -£4,020 1267 223 Aug-11 1 1267 6
£6,857 £2,112 -£4,745 1272 166 Nov-11 1 1272 8
£6,870 £3,277 -£3,594 1280 256 Feb-12 3 3840 15
£6,909 £2,771 -£4,137 1295 214 May-12 1 1295 6
£6,922 £2,134 -£4,788 1301 164 Aug-12 1 1301 8
£6,935 £3,010 -£3,924 1309 230 Nov-12 1 1309 6
£6,948 £3,944 -£3,004 1315 300 Feb-13 3.5 4601 15
£6,994 £4,176 -£2,818 1330 314 May-13 1 1330 4
£7,007 £4,269 -£2,738 1334 320 Aug-13 1 1334 4
£7,020 £3,707 -£3,313 1338 277 Nov-13 1 1338 5
£7,034 £3,640 -£3,394 1343 271 Feb-14 3.5 4701 17
£7,081 £3,374 -£3,707 1361 248 May-14 1 1361 5
£7,094 £2,964 -£4,130 1366 217 Aug-14 1 1366 6
£7,108 £3,294 -£3,814 1372 240 Nov-14 1 1372 6
£7,122 £3,597 -£3,525 1378 261 Mar-15 3.5 4823 18
£7,170 £3,589 -£3,581 1397 257 May-15 1 1397 5
£7,184 £3,505 -£3,679 1402 250 Aug-15 1 1402 6
£7,198 £3,617 -£3,580 1408 257 Nov-15 1 1408 5
£7,212 £2,388 -£4,824 1413 169 Mar-16 3.5 4946 29
£7,261 £2,351 -£4,910 1442 163 Aug-16 1 1442 9
£7,276 £2,728 -£4,548 1451 188 Mar-17 2 2902 15
£7,305 £2,757 -£4,548 1467 188 Aug-17 1 1467 8
£7,320 £3,022 -£4,297 1474 205 Mar-18 2 2949 14
£7,349 £2,561 -£4,788 1489 172 Aug-18 2.5 3722 22
£7,386 £2,447 -£4,939 1510 162 Mar-19 4 6042 37
£7,447 £2,368 -£5,079 1548 153 Aug-19 3 4643 30
£7,493 £2,257 -£5,236 1578 143 Mar-20 0 0 0

It has recovered a bit since then with Barclay's share a bit under 200p, but let's be honest Barclays are a banking share and recommended as a safe investment, of course if I use this example I will be accused of cherry picking.

Note how the biggest dividends came at the times of the highest share price and the big losses reinvesting them incurred, this is not coincidental, high dividend paying shares have a premium attached to them and this premium goes when the dividend goes.

Once you start looking at the consequences of the COVID lock down you start to get very worried, many FTSE 100 companies went back the markets and did new share issues, often doubling the number of shares in issue, simply to stay in business.

The share price drops that inevitably come along with these issues are not short term blips, they are permanent losses, you have to be quite interested in the subject to have seen them but they are real, common and are real bad news for those who need to access funds now.

Bye

Ian
 
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Milkfloat

An Peanut
Location
Midlands
The ability for the parents to pull out the money in an emergency really limits choice and potential yield, it also has tax implications. Do you really need this emergency option? At what age would you like the money to be accessible for the child?
 
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ClichéGuevara

ClichéGuevara

Legendary Member
The ability for the parents to pull out the money in an emergency really limits choice and potential yield, it also has tax implications. Do you really need this emergency option? At what age would you like the money to be accessible for the child?

'Need' is a strong word, but I guess my desire to leave the parents with the option of being able to access it is a sign of both my own personal caution, and my trust in them.

As for age, I'm thinking 18 so they have a choice of a bloody good holiday, a piss up, a car or a sensible investment in a home etc.
 

Milkfloat

An Peanut
Location
Midlands
A Junior stocks and shares ISA could be a good bet, but it needs to be setup by the parents (although you can fund it all directly) but there is no access before 18 unless the child is terminally ill.
 

DCLane

Found in the Yorkshire hills ...
Another suggestion of bonds. My son's grandparents did that with them both having a lump sum at 18.

We put a monthly sum away for each one, in this case £70 a month, which they both got at 18 to use for university / a car/house / round-the-world trip. It means we're not having to fund them at university.
 
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