Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
WHEN it comes to investing for your child, a Junior ISA is a long-term, tax-efficient way to give them a financial head start. With an annual allowance of £9,000 and weeks to go before the end of the tax year, if you haven’t made the most of your child’s allowance for 2021-22 it’s time to get your skates on.
When you’re choosing what to invest in for your child, you can be bold. With up to 18 years before they can access the money, there’s plenty of time for the investments to grow.
Here are four funds to consider:
1. Go Global
A simple and effective way is to invest is in a global fund, like Rathbone Global Opportunities. The fund has an excellent long-term track record, appearing in the first quartile of its peer group over three and five years and over the 17 years that James Thomson has been managing it.
Historically it has seen good growth but James can act defensively when needed. He makes active decisions, picking and choosing the best stocks for the fund as the market dictates - one of the key benefits of choosing an actively-managed fund.
Even as share prices were plunging in March 2020, he told us that he saw it as a “once in a lifetime opportunity”. He’s equally bullish when it comes to tackling inflation. Describing it as a silver lining, he explains: “Inflation lifts earnings if you’re in the right sectors and the right companies”.
2. Keep an eye on Asia
Asian markets like China and India are worth considering as they offer the prospect of tapping into significantly higher economic growth rates. And Dale Nicholls, manager of Fidelity China Special Situations PLC, the UK’s largest investment trust focusing on China, is no stranger to the region.
Nicholls likes ‘new’ China; sectors with good growth prospects, such as consumer, technology and healthcare. He also invests in unlisted companies, with up to 15% of his portfolio in China’s “vibrant and varied” unlisted stocks. Made possible due to the fund’s closed-ended investment trust structure, it’s something which enabled him to invest in Alibaba, three years before it publicly listed in 2014.
3. Throw in a passive
To keep costs down and stop your gains being silently chipped away at over the years, a passive fund, which tracks an index irrespective of what the market’s doing, is a good idea. The Fidelity Index World Fund provides a low-cost, low maintenance, highly-diversified way to do that.
A popular choice, it ranked third in the list of most popular funds on the Fidelity Personal Investing platform in 2021.
4. Look to the future
Any future-focused investment has to comprise some tech so the Baillie Gifford American Fund, from the home of Silicon Valley with 36.5% of its portfolio in technology stocks, is another fund to consider. It was also a best-selling fund on the Fidelity Personal Investing platform in 2021.
More on Junior ISAs
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. The value of tax savings and eligibility to invest in a Junior ISA depend on personal circumstances. All tax rules may change in future. Withdrawals from a Junior ISA will not be possible until the child reaches age 18. All the four funds mentioned invest in overseas markets which will be affected by movements in currency exchange rates. Fidelity China Special Situations PLC and Fidelity Index World Fund invest in emerging markets which can be more volatile than other more developed markets. Fidelity China Special Situations PLC is an investment trust listed on the London Stock Exchange where its price is affected by supply and demand. As an investment trust it can gain additional exposure to the market, known as gearing, potentially increasing volatility. Rathbone Global Opportunities Fund and Baillie Gifford American Fund invest in a relatively small number of companies and so may carry more risk than funds that are more diversified. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.
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