DIY Investor Magazine
/
September 2016
24
1. Valuations which the companies put on themselves
when raising cash could be considered to better reflect
the value of the company than if a professional investor
were not involved.
2. The type of company raising funds tends to be more
complex / with lots of IP, the kind of company that
would possibly find it challenging to get noticed on
other equity crowdfunding platforms.
The fund industry has long preached the mantra that
you should lessen your risk of losses by spreading your
money across multiple assets and the best way to do
that is to let them do it for you. Fund Twenty8 does just
that, genius!
A word of warning, once your cash is in, there’s no
easy way of getting it out, the companies that the fund
invests in are not traded on an exchange, so they are
very illiquid, you are in it for the long haul.
So you’ve put your £10,000 to work, if you want to do
some regular savings there are a few options for you.
Junior ISA (JISA) which come in two flavours, Cash
and Stocks & Shares and you have to chose one or the
other, your child can’t have both.
Junior Cash ISAs can only be opened by a parent or
guardian but anyone can contribute. If you’re investing
over the longer term, a Stocks and Shares JISA is
generally more widely recommended, as within these
there is the potential for capital growth, not just a few
percent a year interest. Just like the standard ISA,
money inside a JISA is tax exempt.
What about the fund managers?
Good question and they have good answers, I’ll take
Aberdeen as an example. They offer a JISA that allows
you to invest in a broad range of the investment trusts
that they offer. You can put lump sums in and they’ll
take regular savings at £30 per month, nice and easy.
If you don’t fancy active management, there are lots of
tracker funds and ETFs that you can put the cash to
work in that can be held within a JISA.
NS&I Children’s Bonds are another tax free savings
vehicle, parents, guardians and grandparents can
contribute up to £3,000 per issue in total, this would
be the option that I myself would explore last as all that
is on offer is a bit of interest compounding tax free.
With interest rates as low as they currently are, there’s
not going to be a huge amount of uplift in the bond
when your son or daughter turn 16 and can manage it
themselves.
Finally, there are Regular Savings Accounts & Instant
Access Accounts from the banks and building
societies. These typically offer you a lovely interest rate
at outset but switch to paying out less about as soon as
the provider thinks that you’re not looking. If you really
want to know which one is currently offering the best
rate, to draw you in, Money-facts is the place to go.
In summary, the message is that a bank account
may be better than a sock; a savings account may
be better than a bank account; a passive fund may
perform better than an active one because it’s cheaper.
Investing over a long period is the only way and over a
long period equity generally performs best and private
companies can give mind blowing returns just don’t put
all your eggs in one basket. Go on Jim!
DIY - for the record, Dianne does not work for
Syndicate Room, or own a racehorse.
