Take a Long Term View
Below is a MRR and PLR article in category Finance -> subcategory Other.
Take a Long-Term View
Understanding the First Year of Child Trust Funds
Overview:
Andrew Hagger, Head of News and Press at Moneyfacts.co.uk, reflects on the performance of Child Trust Funds (CTF) as they reach their first anniversary.
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April 6, 2006, marked a significant milestone: the first birthday of the Child Trust Fund (CTF). There's no doubt that many parents are feeling pleased with the investment choices they've made.
Performance Highlights:
One year since its launch, parents who chose riskier investment options have seen impressive growth. For instance, an initial deposit of £250 in the F & C Global Smaller Companies investment trust could grow to over £370. This far outstrips the returns from cash-based investments, where the same deposit grew to about £262 over the past year.
While the cash returns might seem modest in comparison to some high-performing equity-based CTFs, it's still better than nothing. This is a reminder to the half a million parents who haven't yet opened an account, potentially missing out on any return for their children.
Government Support:
For those who haven't yet acted, it's important to note that the government, as announced by Gordon Brown, will contribute an additional £250 (or up to £500 in certain cases) to your child's chosen fund on their seventh birthday.
Investment Trends:
Reports from Abbey and Nationwide BS indicate that over 60% of opened CTFs are cash-based. However, as parents see impressive returns from some equity-based funds, there may be a temptation to switch.
A Word of Caution:
Before making any hasty decisions, consider that funds offering higher returns also carry greater risk during turbulent times. It's essential to see CTFs as long-term savings and investment accounts, rather than be swayed by short-term gains.
For those seeking a balanced option, stakeholder equity-based funds offer potential higher returns than cash CTFs but with less risk than non-stakeholder investment trusts.
Consider Professional Advice:
If you're uncertain about the best option for your child's savings, consulting with an independent financial adviser can be invaluable. This guidance could prove beneficial when your child reaches 18 and gains access to their savings.
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Taking thoughtful steps now can secure a brighter financial future for your child.
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