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hi, im a trustee for my godaughter and she was left £5k in a will

whats the best way to invest this for her to get maximum back

ideally she wont have it till she is at least 18 or even 21/25 - she is now 2.5yrs

interest rates are so crap so was wondering to invest in premium bonds

That's a good idea, you don't get interest on any investments but you will be in with a chance of winning cash prizes well you GD will not you personally.

That's what I thought

Interest is rubbish these days

Tho have told her mum if my gd wins a million that godmother blondes wants a share when she is 18

I'm nearly a month late responding to this - apologies. Hopefully the response wil be useful for someone else, even if it's too late for you.

As I read it, your goddaughter has been left £5k, and it needs to be invested for at least 15 years. You are a trustee of the money, so you have three aims: firstly to preserve capita, secondly to obtain a return on the money, and finally to show that you've made sound investment decisions.

Premium bonds are a very bad idea. There are a few reasons for this:

- while premium bonds may be bought for a child, they can't be bought by a non-relative,
- a single adult is responsible for managing the investment until age 16 - tricky if there are multiple trustees,
- The amount invested is too low to play the law of averages, and makes the investment a bit of a punt,
- Over 15 years, there's likely to be significant capital erosion due to the effects of inflation.

Cash investment accounts are similarly likely to produce a loss over the longer term as they aren't keeping up with inflation.

Given the timescale, I'd be looking at investing in equities. There isn't enough cash to buy a diverse portfolio of individual stocks, so you need some sort of mutual fund. This could be an index tracker, OEIC or investment trust. Witan and F&C both offer products that can be created as a trust; I'm sure there are others.

Remember that this is her money, not yours - you need to keep it entirely separate from your own money; don't be tempted to open an ISA in your name for her, for example.

evilkitten.

evil what would you recommend if the timescale was shorter? Like 2-7 years?

evil can I ask a question too? I have heard Dave Ramsey talking about mutual funds but didn't realise they were a UK thing too. (Am not a finance person as you can tell!) Are they a good way for people to start investing? Could you recommend some reading? I've scoured the MSE site but am none the wiser. Thanks!

Antoinette -

Mutual funds (such as OIECs and Investment Trusts) are investment vehicles that allow you to easily own a diverse range of shares and bonds. They are a good way to get started, but there are some things to be aware of:

- there will be charges involved, which will change depending on whether your fund is actively or passively managed (e.g. a tracker)
- Some will provide income, some won't
- Investment Trusts are allowed to borrow money, so will be a bit more 'geared', which allows better returns, or greater losses.

A really good place to start is this book:

www.amazon.co.uk/Girls-Best-Friend-Her-Money/dp/0752261711/ref=sr_1_1?ie=UTF8&qid=1366025004&sr=8-1&keywords=a+girls+best+friend+is+her+money

It's a bit out of date/out of print, but it's well written, and addresses personal finance for women really well. You can also get a copy for a penny (leaving P&P aside), which is a big plus.

www.amazon.co.uk/Love-Is-Not-Enough-Womans/dp/0007235194/ref=pd_cp_b_0 might be more up-to-date, but I've not read it.

evilkitten.

If the timescale were shorter (2-7 years), then it's a bit tricky. If it was my money, I'd still be investing in the stock market, or possibly corporate bonds with a similar duration if I was feeling cautious. However, for someone elses money, I'd probably go with a fixed term bond. Returns wouldn't be stellar though.

Thanks.

For a cautious choice it might be worth looking at a fixed term cash ISA. If you can lock it away for, say 3 years you can often get a reasonable rate, maybe 3%-ish, which is not great but should/may more or less keep up with inflation. You can find the current best deals in the financial pages - or go to a site such as moneysaving expert.

I suspect that the second of evilkitten's book suggestions will be good. The author is editor in chief of the weekly magazine Money Week which I find very clear and well written for non-experts such as myself.

I should just add that you do need to remember to reassess the situation when the fixed term expires, as they may then just transfer the money to a crap rate without warning you.

Thanks evilkitten

Be careful with ISAs - can only be used for personal money, not money held in trust like in the OPs situation.

How about a JISA? You would need to buy 2, one for 2013 -14 and, next April, one for 2014-15, as the maximum for this year is £3720 (you should check that figure!). They would be in her name, but a wise adult could decide when to hand over the paperwork!

You can get them in the same form as adult equity ISAs; personally I'd look at a tracker for its low charges.

Only problem is finding one! Cofunds do them, but I don't know who else.

The OPs goddaughter won't be eligible for a JISA.

Remember with all of this that this is the child's money held in trust; 'forgetting' to hand over paperwork etc. at 18 could leave the trustee open to legal action.

Amicissimma -

When you say you're having trouble finding one, are you referring to Adlt ISAs or trackers?

ISAs are ten a penny, as are trackers (depending on what you want to track). HSBC has a low charging FTSE one that might be of interest. Cofunds is a platform aimed at IFAs. Beware of platform charges in addition to fund charges.

Ek