I need a sim­pler Isa port­fo­lio

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My late husband was an en­thu­si­as­tic in­vestor. Fol­low­ing his death I’ve in­her­ited his large Isa port­fo­lio which is in­vested in the shares of about 25 com­pa­nies, most of which I know noth­ing about. I would like to switch to in­vest­ments which are sim­pler to man­age. I am in my late six­ties and in good health. I do not need to draw an in­come from this money, and would like it to form part of my es­tate which will go to my two adult chil­dren. Can you sug­gest any ap­pro­pri­ate in­vest­ments with which to re­place the shares? LP, SUR­REY

an­swers your ques­tions. This week: a widow wants to make her husband’s port­fo­lio easier to man­age, and the best way to in­vest an in­her­i­tance for chil­dren

ex­emp­tions to gift money to your chil­dren now, con­sid­er­ing the use of trusts and the use of Busi­ness Prop­erty Re­lief qual­i­fy­ing in­vest­ments, may be bet­ter than re­struc­tur­ing your Isa.”

Alis­tair Cun­ning­ham, a fi­nan­cial plan­ner at Win­gate Fi­nan­cial Planning, said that the is­sue with a port­fo­lio of shares is it is in­her­ently likely to be quite risky; with even blue-chip com­pa­nies ris­ing and fall­ing in value.

Wid­ows tend to be more cau­tious, and even a 50pc eq­uity port­fo­lio may have too much in shares, with maybe one-third more ap­pro­pri­ate. With a time frame for in­vest­ment that could eas­ily be 20-30 years, and no im­me­di­ate need to ac­cess the cap­i­tal, a range of man­aged col­lec­tive in­vest­ments – funds – would be more ap­pro­pri­ate than shares. Mr Cun­ning­ham sug­gests Van­guard, Ar­chi­tas and Stan­dard Life MyFo­lio. in­vest the money for them un­til they are 18, when they can choose to con­tinue in­vest­ing or with­draw the funds. Where should I in­vest to pro­duce high but se­cure re­turns? PT, HERTS

Your op­tions de­pend on how this money has been left to your chil­dren and what you want to achieve.

If the money has been left in a trust ar­range­ment, your op­tions will de­pend on the type of trust that is used, al­though broadly you will have to keep the money in the trust un­til your chil­dren are old enough to ac­cess it them­selves. You should be able to make in­vest­ment choices within the trust as­sum­ing you are a trustee.

You say that you want to “pro­duce high but se­cure re­turns”. This is un­der­stand­able but not so easy. Your op­tions are more likely to be “low but se­cure” re­turns, such as hold­ing the money in cash sav­ings ac­counts, or “high but un­cer­tain” re­turns, or some­where in the mid­dle.

If you are in­vest­ing for a rea­son­able pe­riod, say 10 years or more, you should achieve a bet­ter re­turn by in­vest­ing in shares rather than in cash. Patrick Con­nolly, a cer­ti­fied fi­nan­cial plan­ner at Chase de Vere, sug­gests Rathbone Global Op­por­tu­ni­ties, M&G Global Div­i­dend and Van­guard FTSE De­vel­oped World as three po­ten­tial in­vest­ment funds to choose.

This could work for your younger child but you might need to be more cau­tious with your older child’s in­vest­ments, which may only be held for seven years.

Ei­ther way, as you are in­vest­ing for your chil­dren you won’t want to lose money. You can re­duce risks by in­vest­ing in other as­set classes such as fixed in­ter­est and prop­erty along­side shares. You could in­vest in multi-as­set funds. Mr Con­nolly sug­gests Schroder Multi Man­ager Di­ver­sity, In­vestec Cau­tious Man­aged and Van­guard Life Strat­egy 60pc Eq­uity. “You could also re­duce the risks of mar­ket tim­ing by in­vest­ing the money in in­stal­ments rather than all at once.” If the money is out­side a trust you have more choice of in­vest­ment wrap­pers.

Ju­nior Isas com­bine tax ef­fi­ciency, sim­plic­ity, a wide choice of in­vest­ment op­tions and an an­nual con­tri­bu­tion limit of £4,128 for the 2017-18 tax year. This is a good op­tion but the an­nual in­vest­ment limit means you’ll need to in­vest the money in Ju­nior Isas over a num­ber of years. At age 18, your chil­dren can ac­cess their money if they want or leave it in­vested.

You could hold the money in in­vest­ment funds out­side a Ju­nior Isa. This can be in a “bare trust” for the chil­dren’s ben­e­fit. Or they can be des­ig­nated to the chil­dren with­out a trust be­ing used. Here, you might have to demon­strate that the money be­longs to the chil­dren.

Pen­sion sav­ings for chil­dren ben­e­fit from ini­tial tax re­lief of 20pc on con­tri­bu­tions up to £2,880 net (£3,600 gross) each year, and you are safe in the knowl­edge that the chil­dren will not be able to squan­der the money at an early age. Un­for­tu­nately, they won’t be able to ac­cess any of their pen­sion sav­ings un­til they reach age 58 (or later) so this would not work in your case.

‘Keep­ing the cash in an Isa may not be the best ap­proach’

Gen­er­a­tion game: Any­one un­der 18 can put £4,128 into a Ju­nior Isa and £3,600 into a pen­sion each year

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