When it comes to helping clients pick the right Isa for them, decisions on wrapper type and investment choice often come down to age, as analysis from Interactive Investor and the Association of Investment Companies has claimed.
The AIC has said there are several particular investment trusts which would work best for different age groups, whether someone is on the hunt for growth or income - or a mixture of both.
1) The young ones
The Junior Isa allowance stands at £9,000 for each tax year.
The average parent saved £1,133 into these accounts in the 2020-21 tax year, according to the latest HMRC figures available.
When it comes to investing for youngsters, the Junior Isa is a great place to start but it is important to consider how best to build up that money, according to financial advisers and wealth managers.
Speaking to the AIC, Paul Chilver, associate and financial planning manager at Birkett Long, said: “Younger investors who have a longer-term investment horizon can take more investment risk.
"My first suggestion is an Asian smaller companies investment trust – Fidelity Asian Values. This has an excellent long-term track record and is well diversified with its highest weightings to Chinese, Indian and Indonesian equities."
The old and the new
Another investment company - the F&C Investment Trust, was hailed by Jim Harrison, director at Master Adviser, as knowing "all about longevity". Given it has been around since 1879, young investors in the £5.4bn global trust "can take a longer-term view, and look for a broad spread of underlying assets".
Chilver also likes the relatively new trust – the Odyssean Investment Trust – which is approaching its fifth anniversary and focuses on UK smaller companies - again, as a long-term play.
Generally, most investment advisers cited equities as a long-term growth investment strategy for the Jisa, with investment trusts focusing globally, or in Asia, as capturing that long-term growth.
This has been matched with analysis by Interactive Investors into Junior Isa holdings on its platform, which showed that parents on its platform have often opted for investment trust holdings within their child's portfolio.
According to Interactive Investor: "Traditionally the investment trust sector has been very popular when it comes to saving for children, with some great options."
Similarly, it highlighted that actively managed funds dominate first and second place: Fundsmith Equity and Scottish Mortgage Investment Trust.
Three investment trusts make the top 10 most held stocks, with F&C and Alliance Trust joining Scottish Mortgage, as the table below shows.
Most held Junior ISA stocks on interactive investor overall at 31 January 2023
Instrument | Stock Name |
Fund | FUNDSMITH EQUITY FUND I ACC |
Investment Trust | SCOT MORTGAGE INVESTMENT TRUST ORD GBP0.05 |
Fund | INVESTEC WEATH & INV BALANCED A GBP |
Fund | VANGUARD LIFESTRATEGY 100% EQUITY ACC |
Fund | VANGUARD LIFEST 80 % EQUITY ACC |
Investment Trust | F&C INVESTMENT TRUST ORD GBP0.25 |
Investment Trust | ALLIANCE TRUST ORD GBP0.025 |
Fund | VANGUARD FTSE GLOBAL ALL CAP INDEX GBP |
Exchange traded product | ISHARES CORE FTSE100 UCITS ETF GBP |
Exchange traded product | VANGUARD FTSE ALL-WORLD UCITS ETF US |
Avoiding cash
Analysis of Jisa holders on its platform revealed there are 1,211 Jisa pots worth between £50,000- £100,000, with an average age of 13 and a half.
But cash Jisas, which are still the national default, "won't cut it", according to Myron Jobson, senior personal finance analyst at Interactive Investor.
He said: "Cash Jisas are frankly pointless other than as an option for teenagers approaching adulthood who might shortly need to use their pot and therefore want to remove the short-term risk of a sudden loss of value.
