Junior SIPP - what do I do?

[CandyCanes23]

I’ve invested in Junior SIPPs for my 6yo and new baby. Chosen Fidelity, in adventurous funds as they have plenty of time. I’m adding money on a regular basis. What do I do now? Do I just keep adding money to the same fund? Should I spread money across Fidelity’s funds? There are Buy and Sell options - would I need to sell or just leave them to grow? I’m not really sure how to operate them now I have them!

Thank you!

Just keep adding money to the same funds and leave them to grow for a couple of years before reviewing them. The money's locked in there for over 50 years so no rush to change things.

I'm not an FA so these are just my own thoughts and experience, not financial advice....

The issue with most managed adventurous funds is they are often still rather conservative in their investment strategies, so not really adventurous at all.

Often a significant percentage of the fund is still invested in bonds. This means that growth is less volatile (it doesn't fluctuate wildly up and down in the short term), but in the longer time frame it often depresses the overall growth potential of the fund. Add the higher fees for the managed fund, and the comparison in growth to that of a simple index tracker over time can be quite weighty.

With a Junior SIPP for a 6 year old, the volatility is less of an issue over the time frame involved, because the fund has in excess of 10 years ahead to grow.

Take a look at this 10 year comparison chart from Trustnet, between:
Fidelity Adventurous Multi Asset Fund (C. yellow),
a Vanguard FTSE All Cap Global Index (B. red)
A low cost Vanguard S&P 500 index tracker (A. blue)

Fidelity 10 year growth = 91%
Vanguard S&P 500 index = 342%

You can see that both the Vanguard trackers are more volatile - the short term fluctuations are more noticeable; whereas the Fidelity is a much smoother ride.
But the differences in growth over 10 years are quite marked.

(Of course, the oft repeated phrase that past performance is no guarantee of future growth is an important caution to be noted).

@CandyCanes23 Starting early with investments for the little ones is the best thing to do, and the more volatile funds are the right ones to go with.

No need to buy or sell the fund units you have - or you could if you wanted to, maybe one day you might think "oh that fund is doing better than mine, I'll move the money over there instead" but that's something to do a few years before you draw the pension or if you seriously fu 'screwed' up by buying in to the wrong type of fund to begin with. The people who manage these funds get paid several tens of millions of pounds a year based on their track record and ability to know how the market works, so I prefer to let them deal with it really.

Plus there's always fees and charges to pay every time you place a buy/sell order, and the bigger pot you have the more damage these do.

It's never a bad thing to diversify your investments, "all eggs in one basket" and that kind of thing.. Funds are a lot safer than buying individual stocks or bonds of course, as there's so much built in diversity already. You could pick another fund you like the look of though, read the Key Investor Info sheet, and maybe do something like when you've put £500 in to one fund switch to your alternate until there's £500 in there too, and just go back and forth between the two like that.

Hope this helps 🙂

OP - do make sure that you get tax relief at source on the first £2880 of your contributions each year. Anyone, even a baby, is entitled to it.

Don't be too swayed by the S&P 500 performance in recent years. The outperformance was principally driven by a few tech stocks - and the outperformance may not continue.

A Fidelity Adventurous fund is a very sound choice for young children with a 50 year + investment time horizon....

'Don't be too swayed by the S&P 500 performance in recent years. The outperformance was principally driven by a few tech stocks - and the outperformance may not continue'.

I think this is somewhat misleading.
The annualised average return of the S&P 500 since its inception in 1957 is 10.26%, with dividends reinvested.

Fidelity's own website Investment Objectives states:
The Fidelity Multi Asset Adventurous Fund targets an average annual return of 6.5% after the deduction of ongoing fund charges, over a typical market cycle of 5-7 years.

I am not suggesting that one fund is better than the other, only that past performance and investment objectives are comparable over a much longer time frame than suggested by the quote.

Thank you all very much for your advice, it’s greatly appreciated. I didn’t want to sit back thinking I’d done the right thing, only to find in the future I should have been doing x y & z! I’m reassured I’ve made the right choice for now, but will certainly look at diversifying in future with continued investment. Thanks again.

One thing I would say, is, over the years keep alert for rule changes, legislation changes and so on. Mostly these will be irrelevant but over a 50 year period a lot will change about pensions and tax and so on. My parents took out whole of life with profits insurance policies for my sister and I as babies - they were a common way of investing back then. 50 years later an awful lot has changed and their value isn't what our parents would have hoped. (we investigated options for changing or selling them intermittently 20 and 30 years ago but have kept them on for now).