Showing posts with label Child trust fund. Show all posts
Showing posts with label Child trust fund. Show all posts

Saturday 10 March 2012

Why not start a portfolio for your child, like Simple Soul does for his daughter, Nora?


[quote author=soulsimple link=topic=27804.msg735122#msg735122 date=1328783721]
http://www.investlah.com/forum/index.php/topic,27804.0.html
goals for her portfolio.
after she was borned i started a little portfolio for her. hope that it grows well till she is 20. simple goal of 15% returns yearly. hope to add funds yearly into it(on top of dividends received) n might diversify into diff assets as time n opportunity permits.
how she is faring ok(i guess). pls feel free to share your opinions.
 :)
[/quote]


Nora was born on 8.9.2011.  Her father, Simple Soul started a portfolio for her.  Here is her portfolio.
http://www.investlah.com/forum/index.php/topic,27804.msg735140.html#msg735140

                 Avg. Price         9.3.2012           % Gain
Dlady............RM 19.8 ......RM.29.9............ 51.01%
GuanChg......... 2.183...........2.61...........19.56%
LPI..................12.29..........13.62..........10.82%
Nestle..............47.46..........56.24..........18.50%
Padini.............. 0.998..........1.52............52.30%
PetDag.............16.02..........18.36.........14.61%
UtdPlt.............. 17.36...........25............. 44.01%

Let's have a good look.  It is a portfolio of 7 stocks that are highly selected, that is, a concentrated portfolio.  5 of these stocks are from the consumer sector (Dlady, GuanChg, Nestle, Padini and PetDag), 1 from the insurance sector and 1 from the plantation sector.

All these companies are growing their revenues and earnings year on year.  Their businesses also throw up a lot of free cash flows.  All give dividends.  Another feature common to all these companies is they are growth companies, growing at various rates.  

What about their durable competitive advantage and economic moats?  Yes, these businesses, except UtdPlt do have these qualities.  UtdPlt is a well run plantation company and presently enjoy the good returns due to the high price from the crude palm oil.  CPO prices can be cyclical and CPO is traded like a commodity with its price determined by supply and demand.

By buying these companies at a time when the market was down in September 2011 and last quarter of 2011, Simple Soul has managed to buy these wonderful companies at fair or bargain prices.  The market is often volatile and in the short run, psychological factors drive stock prices.  However, over the long term, the stock prices are driven by fundamental factors.  By staying with wonderful companies with durable competitive advantage and economic moat, this portfolio is well constructed to protect against any downside risk and with a promise of a fairly good return.

Let's study the gains of the individual companies in this portfolio over this short period since its inception in September.  For the smart and shrewd investor, the like of Simple Soul, it is comforting to know that he can find bargains in September when everyone was leaving the market in disgust.  But this isn't surprising for someone who practises value investing.  Another point of note is to realise that it is not uncommon to see a stock price going up 50% or down the equivalent 30% within a short period of 1 year.  3 stocks in this portfolio have gone up about 50%.  The gains in the other 4 stocks are in the teens.  Who said that you have to invest in "lousy" penny stocks to seek such gains?  

However, the long term performance of this fairly concentrated portfolio will track the earnings growth of the individual stocks.  For this, Simple Soul has certainly selected his stocks well.

This is a story of a caring father who is investing for his daughter Nora.  Warren Buffett started his investing at the age of 13 years, and seriously so in his early 20s.  As Nora has a good 20 years headstart in her investing career and knowing the power of compounding, I shudder to project her networth when she too reaches her age of 80s. :-)

Well, Nora will realise someday how lucky she is having a caring father who has such a foresight.  Happy Investing to Simple Soul, 

Friday 10 April 2009

Why not start a Trust Fund for your child?

From Times Online
February 20, 2008


The beginner's guide to Child Trust Funds

James Charles

Child Trust Funds (CTFs) were introduced by the Government in 2005 to encourage parents to save for their children's future About three million children now have funds.

Children gain access to the pot of cash in a CTF only when they turn 18, but nobody else, including parents, can access the money before that point. The interest earned by savings in a CTF are tax-free.

Who is eligible?

Any child born after September 1, 2002, who qualifies for child benefit, is eligible for a CTF. Children born after the introduction of CTFs in April 2005 are enrolled automatically. The Government sends parents a £250 voucher to open a fund and they can invest this in either a savings account or one that invests in stocks and shares (see below for information on the types of funds available).

How to save

Background
The beginner's guide to Child Trust Funds
National Savings & Investments explained
How to budget
Background
The beginner's guide to current accounts
How to reclaim bank charges
Bonds explained
Related Links
Those who save make best use of child funds
Labour caves in over charges for child trust funds


Families on income support are given a total of £500.

When children reach the age of seven they are sent a further £250 or £500 by the Government.
The Government will open a stakeholder Child Trust Fund automatically if a child's parents fail to do so within 12 months of the voucher being issued.

Parents of children born between September 2002 and April 2005 should apply for their children retrospectively. For more information, or if you have not received the voucher, call the Child Trust Fund helpline on 0845 3021470 or textphone on 0845 3667870.

Who can contribute?

Parents and relatives are encouraged to make regular contributions to the trust fund, although they can do so whenever they choose.

The maximum that can be paid into an account is £100 a month, or £1,200 a year. Government contributions do not count towards this limit.

The average amount that parents deposit each month is £23, according to figures from Revenue & Customs. Other research, by Nationwide Building Society, found that 60 per cent of CTF accounts received no additional contributions at all.

What are the benefits?

The idea is that the nest egg should grow in value over time. When children have access to the cash at the age of 18, they can then use it to pay for university, a deposit on a house or anything else they choose.

You can find out how big a fund will be when a child reaches the age of 18 by using a Child Trust Fund calculator.

The three options

There is a huge range of different CTFs available, particularly if you go online. It seems that everyone from Asda to Legal & General offer CTFs of some description. Indeed, there are many funds catering for niche markets, such as ethical or shariah compliant funds.

There are three main types of fund.

Savings accounts:

A savings account is the most secure option and mirrors the deposit accounts available on the high street, though the rates are usually a little better. There are also no tax liabilities.

Stakeholders:

Most experts recommend opting for a stakeholder equity fund, as these take advantage of stock market growth and are likely to produce a greater return than cash-only acccounts over the longer term. Your cash is invested in the stock market but is managed by your fund provider. Parents have a limited choice of the types of funds in which the money is invested.

The Government has made sure that the level of risk is small. When a child reaches the age of 13 the money will be moved to safer, cash-based accounts.

The Government has also capped the annual management charge on stakeholder CTFs at 1.5 per cent.

Stocks and shares:

The final option is a purely stock market-based option. This is the riskiest form of investment and allows for the greatest degree of investment freedom. Parents should remember that the management fees on these investments are not capped in the same way as stakeholder CTFs.

Over the long term it is likely that the return on stock market investments will be greater than cash investments, but parents should be aware that the value of the CTF can go down as well as up, although this is unlikely.


Five news stories
Labour caves in over charges for child trust funds
The 3Rs: reading, writing and interest rates
One in four parents ignore CTF
Teenagers urge curbs on spending CTF money
Parents spoilt for choice
Five features
Child funds grow up
The best places for your child trust funds
Make your child a millionaire
Parents’ alternatives to a child trust fund
Gifts that are not just for Christmas
Five websites
Child Trust Fund
HM Revenue and Customs
Direct.gov.uk - Parents Guide
Money Extra
Stakeholder Saving