How often should I contribute to a Jisa?
I seek your advice about investing in Child Trust Funds (CTFs) and Junior Isas (Jisas). I have some experience, having been investing £25 a month into funds for two grandchildren and three step-grandchildren for periods from two to 12 years.
Investments for the four eldest all went to CTFs offered by F&C, but for the youngest I chose a Jisa invested with AJ Bell.
I greatly appreciate the fact that I have online access to all information with AJ Bell, where a lump sum of £500 was initially split between F&C Global Smaller Companies trust and Murray International trust, with £25 monthly for 23 months into Murray International.
A total of £1,547 has been invested so far, but as a result of charges and the weakness of Murray International the total value is only £1,507. The gap was much larger, but has narrowed as the share price has climbed since January.
Initially my step-daughter had astutely pointed out that Halifax offered 6 per cent a year for a child's savings account.
I discouraged the suggestion, but two years on I checked the facts at my local Halifax branch and found that although Halifax have held the offer of 6 per cent for some years, there is no compounding of interest.
The problem with AJ Bell, and apparently other brokers, is that for each £25, £1.50 (6 per cent) disappears in charges; even when larger lump sums of £250 were invested, nearly 4 per cent went in charges. So would investing periodic lump sums be a better option than £25 monthly?
I have no complaints about the performance of the various F&C trusts I chose, but I found them extraordinarily unhelpful over the phone. I have also looked at Hargreaves Lansdown, with whom I hold my own investments.
I have advised the parents with F&C accounts that I can see no reason to switch to Jisas or change companies, given the performance so far and the costs of switching.
My conclusion is to stick with the current schemes but I would be interested in your comments about choice of provider and the timing of investments.
Richard Corbett, by email
Justin Modray of candidmoney.com replies: Sharedealing services such as AJ Bell usually charge for monthly trades which, even at £1.50 a trade, is quite painful on a £25 monthly investment.
A practical way to avoid this would be to purchase unit trust or open-ended investment company funds.
These are not listed on the stock market so most Jisa platform providers don't charge for deals (AJ Bell being an exception); you'll only have to pay the annual platform charge of typically 0.25 per cent plus.
Few funds have initial charges these days and you'll find annual charges are broadly comparable to, or cheaper than, similar investment trusts.
If you stick with investment trusts and AJ Bell, then monthly deals would cost £18 a year versus £9.95 for a single sum, so there's not much in it.
In theory monthly saving can reduce risk by spreading your investment over the year should markets prove bumpy, but equally you'd lose out if markets rose over the period, so I wouldn't get hung up on it.
Over the next five to 10 years you'll probably do fine with your current choices, even with the dealing charges; nevertheless, the combination of volatility and charges can be painful over the short term, as you've experienced.
If you opt for funds within your Jisa instead, then transferring to Charles Stanley Direct should save you money. It charges an annual 0.25 per cent platform fee (AJ Bell charges 0.2 per cent for funds), but unlike AJ Bell there's no fund dealing charge.
The Halifax savings account does offer 6 per cent. However, it's for one year only and is limited to a monthly saving of between £10 and £100.
Given that you must drip feed money over the year, the actual interest is closer to 3 per cent, ignoring any interest you may earn on the cash waiting to be contributed held elsewhere.
It's still a decent cash rate in the current climate, but I'd opt for the stock market over five to 10 years provided you're comfortable with the risk.