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I am a 78-year-old with a granddaughter of 19 who is asking me for advice on investing roughly £5,000 which she has been given.
On retirement, my husband invested our savings in Isas with Jupiter, Morgan Stanley and Fidelity which I think is the best, especially the Global Special Situations Fund W Acc.
However, my husband has alzheimers so cannot help her and I am on a steep learning curve with all our finances.
Investment help: A stocks and shares Isa might be a good way to listart investing (picture posed by models)
I would like to help my granddaughter but am worried about giving her bad advice.
Can you let me know what you think would be her best course to follow to get the maximum risk-free profit with her money.
Angharad Carrick, of This Is Money, replied: It is great to hear that your granddaughter is looking to invest at a young age and even better that you want to help.
The first thing to note is that you mention investing for the ‘maximum risk-free profit’ but there is no such thing, investing always involves taking some risk with your money.
In a savings account, your granddaughter will earn some interest and the balance she paid in will not be at risk; in an investment account she has the chance of a greater return but there is the risk the investments will decline in value.
However, low rates on savings accounts mean the money is at risk from having its value eroded away by inflation. With inflation currently running at 5.5 per cent, according to the ONS, that’s a given right now.
If your granddaughter does decide to invest she may want to open a stocks and shares Isa, which would let her invest in shares, funds and investment trusts, on a DIY investment platform such as Charles Stanley, AJ Bell, Hargreaves Lansdown, Interactive Investor, or Fidelity, or with an investing app, such as Freetrade.
In an Isa, she could invest up to £20,000 a year and all capital gains and dividend income will be sheltered from tax (and there’s no need to do any tax return admin to do with buying or selling investments).
Our DIY investing platform round-up will help her understand their charges and which may be best for her.
She then has to decide what to invest in. With so many funds and investment trusts on offer across a number of sectors and regions, it can become confusing, so she may want to opt for a simple global tracker fund that invests across the whole world’s stock markets at a low cost.
You can pay a professional to invest for your granddaughter but the fees will prove costly on a relatively modest pot.
She could use an automated service, which involves an online wealth manager, or robo-adviser, which offer tools to establish investment goals and risk levels which will be used to build a portfolio that they manage.
You pay a bit for this, but in return you get easy hands-off investing with some expert help. Read our review of the main robo-advisers here.
We asked some experts for their views on what your granddaugher could do.
David Crozier (CFP and Chartered MCSI) of Navigator Financial Planning replied: As usual when investing, ‘It depends’. What does your granddaughter want the money for? When is she likely to need it? How does she feel about investment risk? Any concerns about the impact on the planet?
My starting point would be an Isa of some form, to get the money growing free of tax.
If she plans to use it towards a house, a Lifetime Isa is a great option.
She could invest the maximum £4,000 now, and the rest after 6 April, turning her £5,000 into £6,250. She would have to use it to buy her first house or leave it until retirement.
If she wants flexibility, then a bog-standard Isa might suit.
No tax relief, but also no restrictions on how the money can be spent.
Isas and Lisas can be held in cash or invested in stocks and shares.
‘Risk-free profit’ is an oxymoron, I’m afraid. Either she invests for the medium to long term, in hopes of a decent return on the money, accepting that at any time the value of the fund can go down as well as up; or she keeps it ‘safely’ in cash – which risks its value being eroded by inflation.
As always, I would suggest taking advice from a financial planner.
Nicholas Hamilton of Mazars replied: It’s always important that you seek professional guidance and advice when it comes to investing capital, particularly where you do not necessarily have the knowledge or prior experience of doing so yourself.
Investment decisions need to take into account a whole range of factors, including; current global economic and market conditions, an individual investor’s views on investment risk and their capacity for loss i.e. how much they can afford to lose in an investment before it impacts on their standard of living, and the objectives for the funds in question (in particular, the time over which the monies are to be invested).
The decision on how to invest £5,000 for your granddaughter will likely therefore differ materially from how you may invest the same sum of money yourself.
I’d suggest that you speak with a financial adviser about the decision as they will be able to provide some personalised advice to your granddaughter (and also review your own financial position if you desired).
Angharad Carrick replied: You may want to consider paying for some one-off financial advice but beware the fees could rack up quickly.
Most people will baulk at the cost of paying for financial advice to invest £5,000 – and you might find advisers say your granddaughter does not have enough money for them to advise her.
Read our guide to one-off financial advice and its costs.
As a beginner investor, your granddaughter may want to familiarise herself with some of the DIY investing platform and stocks and shares Isas on offer instead.
There are plenty of options including Vanguard, which charges 0.15 per cent per year and has no costs for buying and selling shares.
Its LifeStrategy funds that invest in shares and bonds around the world are a popular option for investors.
In its literature – as with many of the platforms – the funds come with risk appetites, on a sliding scale, which could help shape her decision.
In here, she can also see which countries and regions are the most heavily invested in, and companies in which the funds invest in.
But Vanguard only offers its own funds, whereas rivals give a full choice of shares, funds, investment trusts and ETFs.
We round-up some of the best DIY investing platforms for stocks and share Isas below.
Remember markets can go down, as well as up and as a general rule, when it comes to investing, most experts say a minimum timeframe is five years – others go as far as saying having a 10 year outlook.
Compare the best DIY investing platforms and stocks & shares Isa
Investing online is simple, cheap and can be done from your computer, tablet or phone at a time and place that suits you.
When it comes to choosing a DIY investing platform, stocks & shares Isa or a general investing account, the range of options might seem overwhelming.
Every provider has a slightly different offering, charging more or less for trading or holding shares and giving access to a different range of stocks, funds and investment trusts.
When weighing up the right one for you, it’s important to to look at the service that it offers, along with administration charges and dealing fees, plus any other extra costs.
To help you compare investment accounts, we’ve crunched the facts and pulled together a comprehensive guide to choosing the best and cheapest investing account for you.
We highlight the main players in the table below but would advise doing your own research and considering the points in our full guide linked here.
>> This is Money’s full guide to the best investing platforms and Isas
| Admin charge | Charges notes | Fund dealing | Standard share, trust, ETF dealing | Regular investing | Dividend reinvestment | ||
|---|---|---|---|---|---|---|---|
| AJ Bell YouInvest | 0.25% | Max £3.50 per month for shares, trusts, ETFs. | £1.50 | £9.95 | £1.50 | 1% (Min £1.50, max £9.95) | More details |
| Bestinvest | 0.40% | Account fee cut to 0.2% for ready made investments | Free | £4.95 | n/a | n/a | More details |
| Charles Stanley Direct | 0.35% | No platform fee on shares if a trade in that month and annual max of £240 | Free | £11.50 | n/a | n/a | More details |
| Fidelity | 0.35% on funds | £45 fee up to £7,500. Max £45 per year for shares, trusts, ETFs | Free | £10 | Free funds £1.50 shares, trusts ETFs | £1.50 | More details |
| Hargreaves Lansdown | 0.45% | Capped at £45 for shares, trusts, ETFs | Free | £11.95 | £1.50 | 1% (£1 min, £10 max) | More details |
| Interactive Investor | £119.88 as £9.99 per month | £7.99 per month back in trading credit | £7.99 | £7.99 | Free | £0.99 | More details |
| iWeb | £100 one-off | £5 | £5 | n/a | 2%, max £5 | More details | |
| Freetrade | Free for standard account £3 month for Isa | Freetrade Plus with more investments is £9.99/month inc. Isa fee | No funds | Free | n/a | n/a | More details |
| Vanguard | 0.15% | Only Vanguard funds |
Free | Free only Vanguard ETFs | Free | n/a | More details |
| (Source: ThisisMoney.co.uk March 2022. Admin charges quoted annually, may be monthly or quarterly) |
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