BLOG: Junior ISA at 10 – which fund has set your child up for life?
And a successful 10 years it has been. Despite worries that the European Union may unravel in 2011 (and again after Brexit in 2016), trade wars, geopolitical tensions and the Coronavirus, investment markets around the world have performed well over the past decade.
An initial investment of £3,600 – the maximum you could invest in a Junior ISA at the time – could be worth many times that today.
Best performing funds
The best performing fund over the past decade has been Baillie Gifford American. Run by a team of four co-managers who focus on the small number of companies that create exceptional returns, it has turned an initial investment of £3,600 into a pot of money worth a staggering £36,284.16* – enough for a deposit on a first home or to pay off university debt.
The second best-performing fund – Morgan Stanley US Growth – wasn’t far behind. It would have turned the investment into £35,409.96*, while third place fund, Fidelity Global Technology, would today be worth £30,365.17*.
Best and worst performing sectors
The good news for investors is that even if you didn’t have the foresight to invest in one of the best-performing funds, you are still likely to have made money.
Some 23 of the 57 sectors as defined by the Investment Association have, on average, more than doubled your money*. And every single sector, from bonds to equities, to property and even cash – has seen investments increase in value.
The worst performing sector over the past decade has been IA Latin America, with the average fund returning just 1.12%*, growing your pot of money by just £40.33*. But it is at least in positive territory.
The two cash sectors returned 1.5%-2.8%*, with the IA Global Emerging Markets Bond Local Currency (14.42%*) and IA Global Government Bond (27.74%*) sectors making up the rest of the bottom five.
The best performing sector was the IA Technology and Telecommunications sector, where the average fund in the peer group returned 470.1%* turning the initial investment into a pot of money worth £20,523.63. Second was IA Healthcare (374.52%*) and third was IA North American Smaller Companies (334.68%*).
Learn more about the Junior ISA
I’m a fan of the Junior ISA. Not only does the wrapper shelter income and capital gains from the tax man, but the choice of funds and investments available to use within it today is phenomenal.
It’s now possible to save up to £9,000 a year into a Junior ISA, which is a significant amount of money – and beyond the means of many. But the beauty of investing for children is that time is on their side and even small, regular contributions over 18 years can make a huge difference to their financial futures.
What I can’t understand is why people are still opting to put the money into cash though. According to HMRC, more than 5.7 million accounts have been set up, and a total of £6.3bn invested on behalf of children**. But more than half the accounts opened each year are in cash ISAs. With interest rates so low for so long, this makes no sense whatsoever.
As the figures show, equities – although they can be far more volatile – have the potential to return ten times the amount and set a child up very well for the future.
Top 20 funds over the past decade
|Rank||Fund||Turned £3,600 into…|
|1||Baillie Gifford American||£36,284.16|
|2||Morgan Stanley US Growth||£35,409.96|
|3||Fidelity Global Technology||£30,365.17|
|4||Invesco EQQQ Nasdaq 100 UCITS ETF||£29,860.74|
|5||iShares NASDAQ 100 UCITS ETF||£29,681.94|
|6||Polar Capital Global Technology||£27,802.89|
|7||L&G Global technology Index Trust||£27,435.79|
|8||AB International Technology Portfolio||£27,374.24|
|9||Morgan Stanley US Advantage||£25,918.69|
|10||SSGA SPDR MSCI World Technology UCITS ETF||£25,863.60|
|11||AXA Framlington Global Technology||£25,643.35|
|12||FTF Martin Currie Japan Equity||£25,030.45|
|13||GAM Star Disruptive Growth||£24,887.97|
|14||T. Rowe Price US Large Cap Growth Equity||£24,399.49|
|15||Baillie Gifford Global Discovery||£24,367.95|
|16||AB American Growth Portfolio||£24,046.52|
|17||Morgan Stanley Global Opportunity||£23,834.74|
|18||T. Rowe Price US Blue Chip Equity||£23,135.21|
|19||Janus Henderson Global Technology Leaders||£22,950.73|
*Source: FE fundinfo, total returns in sterling, 1 November 2011 to 19 October 2021, all figures are net of fees.
**Source: HMRC, Individual Savings Account statistics, June 2021
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Juliet’s views are her own and do not constitute financial advice.
Juliet Schooling Latter is research director at FundCalibre