A Christmas cracker

Children have started opening their advent calendars and are getting excited about a visit from Santa with his sack of presents. Parents and grandparents, on the other hand, might want to give a present that lasts a bit longer. An investment nest egg could grow over time and make a big difference to a young person when they’re older.

If a parent, grandparent or guardian had invested a one-off £1,000 in the average investment company for a child 18 years ago, it would now be worth an impressive £7,913 (a 691% return), or annualised return of 12%. If they preferred to make monthly contributions instead, for example £50 a month, their total investment of £10,800 over 18 years would now be worth £34,348. That’s potentially enough for a deposit on a first home or a considerable chunk of further education costs.

The top performing investment company sector over the last 18 years is European Smaller Companies, with a total return of 1,306%. This is followed by Biotechnology & Healthcare (1,176%), Global Smaller Companies (1,064%), Global Emerging Markets (1,027%) and UK Smaller Companies (1,001%). The Global sector, popular amongst those saving for children, has a total return of 844% over 18 years.

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “Every parent wants to make their child’s dreams come true at Christmas and give them the presents they want. But mums and dads are also aware that the financial demands being placed on young people today have never been greater and the pandemic is likely to make the situation worse. So, they may want to consider a gift that lasts longer than Christmas and helps a young person with further education costs, a first car or a deposit for a home.

“Parents may want to consider investment companies for their child, which can help to build a nest egg for future financial needs. It’s been a rollercoaster year for stock markets due to the pandemic, but investment companies have performed strongly, with an average return of 8% in the year to date. An investment company gives you a broad spread of investments, allowing you to benefit from the long-term potential of the stock market while spreading your risk. You can start saving for your child from as little as £50 a month, which can be an excellent way to give your child a head start in life.”

Monthly investing in investment companies

 

£50 monthly investment over the past 10 years 

£50 monthly investment over the past 18 years 

Sum invested

£6,000

£10,800

Average investment company

£10,851

£34,348

 

 

 

 

 

 

Lump sum investment in investment companies

 

£1,000 lump sum
investment 10 years ago

£1,000 lump sum
investment 18 years ago

Sum invested

£1,000

£1,000

Average investment company

£2,789

£7,913

 

 

 

 

 

 

Source: AIC/Morningstar. Average investment company return is weighted by market capitalisation and excludes VCTs and 3i.

 

For more information on saving for children with investment companies, visit the dedicated page ‘Saving for your children’s future?’ on www.theaic.co.uk which has six tips on saving for children, as well as a video, guide and jargon buster. And if you’ve decided on the investment company for you, find out how to invest in it in by watching our new educational video here.

 

-ENDS-

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Notes to editors

  1. Performance for the average investment company is the % share price total return for the weighted average investment company (excluding VCTs and 3i). Ten-year performance is from 1/12/2010 to 30/11/2020. Eighteen-year performance is from 01/12/2002 to 30/11/2020. Source: AIC/Morningstar.
  2. Performance for the investment company sectors is the % share price total return for the peer group weighted averages. Eighteen-year performance is from 1/12/2002 to 30/11/2020. Source: AIC/Morningstar.
  3. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment.  Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 358 members and the industry has total assets of approximately £209 billion.
  4. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance.  The value of investment company shares, and the income from them, can fall as well as rise.  You may not get back the full amount invested and, in some cases, nothing at all.
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