12-year plan for a six-year old

By THIS IS MONEY
Updated:

 

I AM looking to invest my six-year old daughter's savings of £2,500 until she reaches the age of 18. What is the best and safest option please? JS, Essex

Jennifer Storrow, managing director of IFA, Gee & Company, replies:

If you want the safest option, you should invest in cash with a Child Trust Fund, but you won't make much money.

If you want the best option, I would recommend opting for a medium-risk investment such as an equity fund - remember you have 12 years ahead of you which is a fair amount of time in investment terms.

Equity funds, such as unit trusts, are controlled by a fund manager who invests the total fund in a number of different companies, thus spreading the risk. There is no guaranteed return and the fund will go through peaks and troughs but over the course of 12 years it is likely you will see a much better return than you would on cash - hopefully, you could triple your money.

Although your daughter cannot put a unit trust in her name, you can put it in yours and designate the fund to her. This is simple to do on the application form. It is sensible to put the fund in the name of the lower-rate taxpayer, so consider this if you have a partner.

A unit trust is not a good idea however if you want to dip into the fund during the 12 years, although of course, you can add to it. You must also keep in mind that there are no guaranteed returns and that you could lose money.

I would recommend the Credit Suisse Constellation Fund, which actually invests in other equity funds, dissipating the risk. Also look at the New Star Performance Portfolio and the Jupiter Merlin Growth Portfolio. Speak to an IFA for further advice.

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