Where the Expert Investor team are investing their Junior ISAs

Some parents may register their newborn for their alma mater before they’ve even left the hospital but a savvier first step could well be opening a Junior ISA.

Around two million children in the UK already have one, with nearly £10 billion squirrelled away in the tax-free wrappers. While most accounts sit below £25,000, more than 50 lucky youngsters are already sitting on nest eggs of more than £250,000, according to Standard Life.

That might sound like an eye-wateringly high sum but the upside is greater still, given the annual allowance has risen from under £4,000 to £9,000. If you max out your allowances and plump for the higher-octane returns of a stocks & shares JISA over cash, compounding has nearly two decades to weave its magic.

Running some simple numbers, if you pay in the full £9,000 every year from birth to 18, assume a 9.6% annual return (the average annual return for a stocks & shares ISA over the last 10 years according to Moneyfarm), your child could be sitting on a pot of almost £500,000. And even a smaller contribution of £1,000 a year could grow to more than £50,000.

Whether you’d trust your 18-year-old with that many zeroes, however, may depend on whether or not they’ll save it wisely for a house deposit…or blow it all on a Vauxhall Corsa with questionable body kit.

The first decision is which platform to use and fees can have a surprisingly large impact on returns. To help with this, we’ve published a guide to the best Junior ISA providers in the UK.

Next comes the exciting part: deciding what to invest in. To help, we’ve asked our colleagues to share where they’ve put their Junior ISA savings. Working at Kepler Trust Intelligence means that we’re naturally more predisposed to pick investment trusts, but there’s also a wide selection of funds and ETFs to explore.

Back in our DINKS days (dual income, no kids), our biggest financial decision was whether to order a takeaway or eat out, whereas life is now a whirlwind between our two little ones and full-time jobs.

We’ve been investing in their Junior ISAs through a monthly savings plan since the kids were born, hoping they might fund their own coffee addiction (or education) one day, and who doesn’t love a good tax break?

The core growth engine of our Junior ISAs is global equity index funds given their long-term investment horizon. We’ve also added a few actively-managed funds, such as Franklin Templeton Royce US Small Cap Opportunity Fund for US small-cap exposure and Artemis UK Select Fund which has outperformed both the index and its peers across all major time periods. We also have a very small allocation to hedge funds for additional diversification.

Knowing that Axel and Nina’s futures are already getting a head start through their Junior ISAs makes the financial side of parenting a whole lot easier and it’s one less thing to stress about in the whirlwind of toddler tantrums and school projects.

I hope my children will use the proceeds of their JISAs for something meaningful, like university or perhaps a deposit on a first flat? Either way, I have assumed that they won’t spend it all on their 18th birthday! This means my JISA investments are likely to have at least a decade to grow.

Aside from looking for exposure to private markets and other alternative asset classes to help with diversification, I’m also looking for a fire-and-forget approach and investment trusts fit this brief.

The newly-merged Alliance Witan (ALW) continues to provide low cost, active global exposure and I value the reassurance of a board being on the front foot in looking after the different nest eggs in the portfolio.

As a long-term investment trust fan, it’s perhaps unsurprising that my first JISA investment was AVI Global (AGT), which offers global exposure and is the best performer in absolute terms. Overall, I have around 40% in equity trusts, including Rockwood Strategic (RKW) which has grown into a meaningful position through strong performance.

Alternatives make up just under a fifth of the portfolio across hedge fund BH Macro (BHMG) and renewable infrastructure fund Greencoat UK Wind (UKW). Elsewhere, I have around a quarter in private equity trusts, delivering strong returns over the years, including CT Private Equity (CTPE), HarbourVest Global Private Equity (HVPE) and Oakley Capital (OCI).

I wanted to give my niece a head start on the long-term benefits of investing, so I opened a Junior ISA. In some ways, a Junior SIPP could be a better option with a full 60-odd years to compound and less of a temptation to fritter it away but ultimately it’s her choice.

I opted for a Fidelity Junior ISA as there’s no platform fee, as well as a broad range of funds on offer. I decided to go passive for my fund choices (to avoid any personal prejudices!) but have some satellite investments around a core global stock market tracker.

The main holding is the Fidelity Index World fund, which has a low 0.12% fee and provides exposure to large and mid-sized developed market stocks. To enhance returns, I added small- and mid-cap exposure through the Vanguard Global Small-Cap Index fund and the Vanguard FTSE 250 UCITS ETF.

I would have plumped for Scottish Mortgage (SMT) as a good long-term compounder, but its 10% or so allocation to China makes it a no-go for my brother.

Education has always been important to us, so we’ve been saving in a Junior ISA for our 3-year-old. Monthly contributions, plus gifts from relatives, go into equity-based funds aimed at long-term growth. Given the long-term mindset, we’ve also felt liberated to select higher-risk investments with the potential for higher returns over time.

We chose Polar Capital Biotechnology due to its very active stock selection with a small and mid-cap bias. It’s a sector with binary outcomes but the right manager can create superior returns over the long-term. It also enjoys strong tailwinds from innovative treatments, the transformative potential of AI and ageing populations.

We’ve also invested in Landseer Global Artificial Intelligence, a global equities fund which offers a relatively well-diversified portfolio beyond just technology firms, without trying to back the ultimate winners.

As our Junior ISA grows, we’ll diversify into other areas and once he stops eating his own body weight in blueberries, we might even have the budget for it.

I’m a big fan of Junior ISAs, not just for the tax perks but to spark an interest in investing (hopefully more Warren Buffett than Nick Leeson). A major advantage is the enforced long-term mindset: the money’s locked away until 18, avoiding ill-advised splurges on limited-edition Pokémon cards or Air Jordans.

We chose Hargreaves Lansdown, and my sons have enjoyed the sibling rivalry of tracking their portfolios, though I sympathised with my eldest having to endure his younger brother’s daily crowing (which mysteriously ended in late 2022). Nothing teaches risk and reward quite like watching your portfolio turn red.

Some early buys such as Fundsmith Equity and Lindsell Train Global Equity have been sold but Fidelity Global Technology, Fidelity UK Smaller Companies and Landseer Global Artificial Intelligence have lasted the distance. More recently, we’ve broadened into commodities with BlackRock World Mining (BRWM) and a WisdomTree Precious Metals ETF.

These days, however, I’m more spectator than manager. My eldest has scored some wins with Vanquis, 3i Group and Pictet Clean Energy Transition. True to second child contrariness, the younger Groves has put his shirt on a mixed bag with some healthy gains on Games Workshop (GAW) and an iShares Listed Private Equity ETF, offset by a modest loss on CT American Smaller Companies.

Still, if it distracts my children from mindlessly scrolling TikTok 24/7, I’ll take that as a win.