Investor Views: 'What Should I Do With My JISAs?'

Private investor Elaine Stevens is thinking at what to do next with her daughters' Junior Individual Savings Accounts

Emma Simon 24 March, 2022 | 10:19AM
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Woman with piggybank

Elaine Stevens initially opened two child trust funds for her daughters after they were born. These were then later switched to a Junior ISA, but she is looking at her investment options now her children are nearing adulthood.

She says: “Both my kids qualified for the free £250 from the government, which encouraged me to open these accounts. Initially they were in a CTF with Foreign & Colonial.

“The performance was reasonable to start with but it seemed to tail off after a few years. I think after a while CTFs were effectively discontinued.

“About six years ago I switched them to into a new Junior ISA with Orbis, where they have been invested since in its global fund.”

Elaine says that the performance has been good. “Initially I had saved around £12,000 into each of their CTFs. But since moving to Orbis around six years ago the value of these JISAs has more than doubled.” However this return also includes additional payments she has since made into the fund.

The accounts are invested in the Orbis Global Equity Fund. This global fund mainly invests in large companies and has a particularly high weighting to US stocks.

The fund has a Bronze Analyst Rating from Morningstar. However, it also has just a 2-star rating, indicating that it has lagged its benchmark more recently.

Performance Fees

Unlike many other funds, this charges a performance fee rather than a regular annual management charge. Elaine initially liked this idea when selecting the fund. “I thought that this would incentivise the fund managers and may boost performance. I don’t mind paying a higher fee if the performance is there. But at least I wouldn’t be paying a high fee when it is failing to deliver.”

It is worth noting though that most performance fees are based on relative performance so even if a fund loses money, but loses less than its relative benchmark, a fee may still be paid.

Elaine also took advantage of an offer at the time for free JISA transfers. She says this made the Junior ISA look very cost effective when it came to moving her existing child trust funds.

However, Elaine is now at a bit of a crossroads. She hasn’t contributed to these JISAs for a couple of years, and the performance has remained static.

Her elder daughter is now 18 and at university, so the JISA has now matured into a regular ISA, which is in her daughter’s name. Elaine’s daughter has asked for her advice on what to do with these funds, and this has prompted her to review her younger daughter’s JISA, with a view to transferring these assets.

Elaine, who lives in Essex, says: “I have been looking at the Vanguard site and the range of ISAs and Junior ISAs they offer. Now that I am paying the full fees on these Orbis funds, and the performance has not been as good, I wonder whether it would make sense to switch to a global tracker fund. If I buy this via the Vanguard site the charges seem to be just 0.15%. This seems very competitive.”

Elaine has yet to switch though. “Part of the problem is that it is my elder daughter has to be involved. To be honest, one of my main concerns is that she will see how much money is in the account and want to spend it! But I am hoping to encourage her to leave it invested for when she has finished university.

“Perhaps some of it can be used to help pay off student debts, or go towards a deposit on a first home.”

Elaine has built up these ISAs gradually. “For a while there was just pretty small amounts going in, which was largely money from birthdays or Christmas.

“My mother-in-law had also started some cash savings for them, and we put these in the accounts too. And for a couple of years, when I initially opened the Orbis account, I managed to save about £500 a month across the two accounts.”

US and China Funds

Outside of these accounts Elaine has her own ISA, which is with Charles Stanley. Again fees were an important part of her decision. “At the time I read an article saying it was one of the most cost-effective platforms for ISAs.

“I invest in a range of funds. I have tried to pick a range global funds, so for example I have HSBC American Index Fund, and Fidelity China Focus.”

HSBC American Index has a Gold Rating from Morningstar for certain share classes, as well as a 4-star rating. Morningstar analysts say: “The fund is expected to continue to outperform its Morningstar Category peers over the long term, with passive investment approaches such as the one offered with this strategy becoming the standard for investors looking to gain exposure to large-cap US equities.”

Fidelity China Focus has a Silver Rating for some share classes. Morningstar points out that despite its recent underperformance, it believes that Fidelity China Focus is equipped to bounce back, thanks to its “experienced portfolio manager, well-resourced supporting cast, and a distinctive process.”

Elaine is a little less convinced. She says this fund appears to have struggled recently and she is thinking of pausing her regular direct debt and perhaps not investing directly in China.

Elaine, who works in marketing, says: “I try to make a regular payment into this account each month, which is then split between four or five different funds, although sometimes it varies depending on other family and financial commitments.

“I am worried though that with the cost of living going up I might have to reduce payments. My eldest daughter is also at university so it is an expensive time.

“However I have made steady returns in recent years, so I will continue to invest what I can. Hopefully, it will provide some financial freedom and allow me to roll back on work a little in future years.” 

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk