Simon Davies is hoping investments into Junior Isas (Jisas) will provide a decent nest egg for his children.
Simon, who works as a sales manager for a life insurance company, has tried to maximise contributions into Jisas for his two children, aged 12 and 15, which he hopes will either pay off student debts, or help towards a deposit on their first home in the future.
Simon says: “My wife and I have tried to make regular payments into these accounts and where, possible, we’ve also put in gifts from grandparents.”
The children’s grandmother had saved almost £1,000 into a savings account for each of the kids but she got fed up with interest rates being slashed so cashed in the account so the proceeds could be added to their Jisas. “Gifts like this have helped us top up the accounts,” says Simon.
Initially Simon opened the Jisas with Alliance Trust and invested directly into its flagship investment trust Alliance Trust (ATST). But this platform has subsequently closed and Simon has since transferred the accounts to Hargreaves Lansdown.
Performance of the investment trust has been “up and down”. Simon says: “We have stuck with it but I have tried to diversify with other holdings in recent years so the Jisas are not just all in one investment.”
Alliance Trust has a Bronze Morningstar Analyst Rating from Morningstar and a four star rating. Morningstar analyst David Holder says: “Despite all of the changes in personnel and investment approach seen here over the past 10 years or so, the primary investment objective hasn't really changed.
“Alliance Trust seeks to be a core investment for investors seeking long term real returns via growth in capital and income.”
Holder points out that in the first quarter of 2017, after a comprehensive strategic review, the board of the investment tasked Willis Towers Watson (WTW) to manage the trust's assets, with an objective of outperforming the MSCI ACWI Index by 2% net of fees on an annualised three-year rolling basis.
He says: “The approach applied by WTW is innovative and brings an institutionally structured investment approach to the retail market. We have seen sufficient evidence of the WTW approach to believe that this is a far improved proposition for investors, as it combines highly active management and low fees.”
While Alliance Trust is a global investment, Simon has also picked funds that invest in Japan and Asian emerging markets, which are higher risk but he hopes will deliver decent returns over the long term.
These investments include the Silver-Rated Stewart Investors Asian Pacific Leaders fund. This also has a five-star rating from Morningstar, demonstrating its strong performance relative to peers.
Simon says: “To me, it seems that this region is where future growth is likely to be, for a whole range of reasons. I’ve tried to pick investments where the managers have a good track record; it’s certainly not an area where I would feel confident picking individual stocks or shares.”
The Value of Money
While his two children know they have accounts, they are not aware of quite how much they are worth. Currently there is around £20,000 into each account but Simon is conscious that he doesn’t want the money to be wasted on “nonsense”.
He says: “I’ve tried to instill the importance of saving; they both have their own savings accounts too, which they do have access too, although there is less money in them. I hope it help to teach them about the value of money.”
Elsewhere Simon’s own investments are mainly through his company pension and his own Isa. He also has a small buy-to-let flat, which he hopes will prove to be a good long-term investment.
“The taxation has changed on buy-to-let, which makes it less attractive. But I’m hoping that by the time I come to retire in 20 years or so, it will have significantly increased in value and may be something we want to sell, either to fund any pension shortfalls, or to help our kids.”
He adds: “As someone who works for a life insurance company, most of my savings have been tied up in various insurance funds. Pensions seem to be the most tax-efficient option for saving for the long-term, so I’ve tried to make the most of this.”
Alongside that, however, he also has a “hotch-potch” of Isas. Investments in these include low-cost index funds which track the US and European stock markets, as well as some actively managed funds, which Simon hopes will deliver outperformance. These include Gold-Rated Lindsell Train UK Equity and Bronze-Rated Liontrust Special Situations funds.
Morningstar analyst Peter Brunt says: “Lindsell Train UK Equity is a standout choice for investors comfortable with a highly concentrated portfolio that can look markedly different from the FTSE All-Share Index. It is managed by an incredibly experienced manager who has shown a disciplined adherence to a well-structured approach.”
The fund has delivered excellent long-term returns for investors, delivering annualised returns of 15.92% over the past 10 years.