Economic Godmother's & Godfather's

[torata]

On behalf of my daughter may I invite you to become a financial Godmother or Godfather and offer your thoughts.

Get her to download the YourJuno app
https://www.yourjuno.co/
so she can eventually find her own way

I'm going to suggest it to my goddaughters.

torata

[Wuffle]

My dad dragged me fishing for years when I was a kid.
I haven't been since.

FCIT - lessons about diversification, discount, buybacks, leverage. Or not, it will just work.

Eventually it will be a house deposit on a 10 times multiple and be drowned out by what actually moves the kids of wealthier parents forward.

W.

[AsleepInYorkshire]

Firstly may I say thank you to all. We've started to talk about how to buy and what to buy.

Where to start though?

I've suggested to my daughter she looks at the following information. With thanks to Stephen if he's reading for pointing this out to me over 20 years ago Twenty years

Profit
Yield
Asset
Debt

I think this will give her a simple understanding. She's already asked me why she should consider single stocks over funds. She's not slow on the take-up with this kind of stuff

I've also suggested she considers reviewing trailing ROCE and ROE as a guide to the past performance of the business. Oh I nearly forgot I've also suggested she look at EPS both trailing and projected. I'd welcome constructive thoughts on this please. She is very good at maths and can understand ratio's and the like and interpret them in a larger context. She's a big fan of Dragons Den and The Apprentice and often her comments during each episode show a great insight about business. She has a very analytical mind augmented by some strong fundamental behaviours such as common sense, risk aversion and patience.

However, she's 14 and we do need to start somewhere. Can I just add please ... she has the final say on anything she buys and if she prefers funds then that's up to her.

Again, a very big thank you for all the previous posts and in advance of any replies from here.

AiY(D)

[Charlottesquare]

Firstly may I say thank you to all. We've started to talk about how to buy and what to buy.

Where to start though?

I've suggested to my daughter she looks at the following information. With thanks to Stephen if he's reading for pointing this out to me over 20 years ago Twenty years

Profit
Yield
Asset
Debt

I think this will give her a simple understanding. She's already asked me why she should consider single stocks over funds. She's not slow on the take-up with this kind of stuff

I've also suggested she considers reviewing trailing ROCE and ROE as a guide to the past performance of the business. Oh I nearly forgot I've also suggested she look at EPS both trailing and projected. I'd welcome constructive thoughts on this please. She is very good at maths and can understand ratio's and the like and interpret them in a larger context. She's a big fan of Dragons Den and The Apprentice and often her comments during each episode show a great insight about business. She has a very analytical mind augmented by some strong fundamental behaviours such as common sense, risk aversion and patience.

However, she's 14 and we do need to start somewhere. Can I just add please ... she has the final say on anything she buys and if she prefers funds then that's up to her.

Again, a very big thank you for all the previous posts and in advance of any replies from here.

AiY(D)

A basic understanding of tangible and intangible fixed assets in the accounts and how they are required to be valued/presented by the business would not go amiss, effectively all is not always as it appears so read all the notes carefully.

Also encourage her to take a look at cashflow and consider re recurring capex, this would certainly be in my toolkit.(is she has time take a look at three to five years averaged)

Final one would be good read re notes re pension liabilities.(is there a latent issue lurking there)

Analysts comments are worth reading ,not to fully believe without questioning but to alert to where there may be problems not spotted.

[stevensfo]

Firstly may I say thank you to all. We've started to talk about how to buy and what to buy.

Where to start though?

I've suggested to my daughter she looks at the following information. With thanks to Stephen if he's reading for pointing this out to me over 20 years ago Twenty years

Profit
Yield
Asset
Debt

I think this will give her a simple understanding. She's already asked me why she should consider single stocks over funds. She's not slow on the take-up with this kind of stuff

I've also suggested she considers reviewing trailing ROCE and ROE as a guide to the past performance of the business. Oh I nearly forgot I've also suggested she look at EPS both trailing and projected. I'd welcome constructive thoughts on this please. She is very good at maths and can understand ratio's and the like and interpret them in a larger context. She's a big fan of Dragons Den and The Apprentice and often her comments during each episode show a great insight about business. She has a very analytical mind augmented by some strong fundamental behaviours such as common sense, risk aversion and patience.

However, she's 14 and we do need to start somewhere. Can I just add please ... she has the final say on anything she buys and if she prefers funds then that's up to her.

Again, a very big thank you for all the previous posts and in advance of any replies from here.

AiY(D)

However, she's 14 and we do need to start somewhere. Can I just add please ... she has the final say on anything she buys and if she prefers funds then that's up to her....She has a very analytical mind augmented by some strong fundamental behaviours such as common sense, risk aversion and patience.

Only 14? Bloody Nora, I'm starting to finally realise the difference between girls and boys. ( I was a late developer! )

You are so lucky to have a kid like that! My boys would have just listened politely for a few minutes before going off to play silly computer games and wondering why their dad was such a dork.

I haven't read all the replies, but I do support the view that, although learning about all the financial terms is great, she'd be safer sticking to large global ITs or ETFs. I don't know a lot about those TV programmes, but I do know that a producer is paid a lot of money to show only what will be entertaining, and erasing the rest, even if it would have been instructive.

Steve

[Jon277]

Split between

A global tracker - maybe Fidelty Index World P Acc
A SP500 tracker - maybe Vanguard S&P 500 UCITS ETF (USD) Accumulating
A Euroe tracker - maybe iShares Core EURO STOXX 50 UCITS ETF

the above are all accumalating - so she could just sit back and wait a decade or more with little work.

All with low costs, for a good source on what is the lowest - this site often has good articles as well as explaining the advantages of passive investing

https://monevator.com/

Jon

[AsleepInYorkshire]

However, she's 14 and we do need to start somewhere. Can I just add please ... she has the final say on anything she buys and if she prefers funds then that's up to her....She has a very analytical mind augmented by some strong fundamental behaviours such as common sense, risk aversion and patience.

Only 14? Bloody Nora, I'm starting to finally realise the difference between girls and boys. ( I was a late developer! )

You are so lucky to have a kid like that! My boys would have just listened politely for a few minutes before going off to play silly computer games and wondering why their dad was such a dork.

I won't bore you with the details. My childhood wasn't the greatest. Quite disturbing and at times a little more brutal than I care to recall. I've had the opportunity to ensure my daughter's is better. When she was 11 we arranged a bank account, a debit card and a monthly allowance of £50.00. I hasten to add she also got a proper present too She's slowly gained confidence and knows how to use her debit card and look at her bank balance. Very much as dealtn has mentioned she needs to make her own mistakes, albeit as a Yorkshireman I started with a much smaller amount and started 4 years ago. My daughter knows how much comes into our house each month and she knows what we spend to live. This gives her some idea of "the cost of living". She also knows that she talks about this with no one else. She still gets an allowance every month but most of it is added to her JISA by her choice. She is allowed to buy what she wants when she wants in the way of clothes and Mum steps in when it's clothes buying time. I'm just the taxi driver and cheque book for lunch on that day She can buy birthday and Christmas presents for friends and family. She's extremely sensible. She knows she's very fortunate that we can afford to do this. I want her to understand that money and her financial security are hers to ensure. In the same way as she's taught how to use a hoover we are teaching her how to use money. It hasn't occurred overnight and I don't spend huge amounts of time on the subject, as I suspect that would have a negative impact.

I haven't read all the replies, but I do support the view that, although learning about all the financial terms is great, she'd be safer sticking to large global ITs or ETFs. I don't know a lot about those TV programmes, but I do know that a producer is paid a lot of money to show only what will be entertaining, and erasing the rest, even if it would have been instructive.

Steve

Yes, thank you. That's one of the difficulties we face and as you say a fund may be a safer option.

AiY(D)

[swill453]

Another reason for choosing a collective investment rather than individual shares is that it'll generally need less of an eye kept on it. She'll be able to set up some kind of recurring investment system of one sort or another that needs little attention.

Then she can get on with living, like any young person in their teens and twenties should be.

Not everyone needs to obsess about investment and getting richer, despite what some of us fuddy-duddies might think.

Scott.

[DrFfybes]

There are 2 aims here, one is to educate regarding shares and investments, the other to build up a pot of assets.

Speaking from experience, I would suggest the 2 are often not directly compatible

As we now have a new tax year, how about letting one lie passively in BRKB/FCIT/VEVE (or HSBC All-World Class C Acc) with divis reinvested where apprpriate, and open a second one this year (you can usually do this with the same broker, certainly ii and HL allow sub accounts) for her to play with and learn.

It will be a good education, even if the only lesson that comes out of it is "I'm not as good at this as I thought, I'll stick to trackers from now on"

FWIW as mentioned elsewhere a while ago I asked the neices and nephews to open JISAs for their children with HL so that we can fund them monthly. None have yet bothered to do so. Still, their loss has been the DEC's gain.

Paul

[Wuffle]

This might be a bit controversial in this environment, I am not sure, but I want to flesh out the previous rushed effort.

In a 5% return world (and going forward from here I think that's quite optimistic after inflation) work pays the reciprocal, so twenty times better. You get all of the money.
I would 'invest' twenty times the effort in the career chat than the investment chat.
Without the bung from you the free cash flow only comes from the leftovers from work. And the chat I had from dumb grafter working class parents put me on a low trajectory that I never recovered from.

The fixed cost / variable cost thing that applies to businesses applies to life as well.
Staying alive has a fixed cost. A 30 grand a year job is twice as effective as a twenty grand job if just staying alive costs ten. Then it gets churned into a property on a multiple as outlined in previous post.
This is the structural reason why private education makes sense to middle class parents at the exclusion of the masses.

W.

[dealtn]

Final one would be good read re notes re pension liabilities.(is there a latent issue lurking there)

To counter that (particularly as someone that has just suggested a basic understanding of tangible and intangible fixed assets) I suggest looking not just at the pension liabilities but also its assets - and certainly not becoming fixated like so many are on the deficit, which is usually the difference between 2 very large numbers, both of which are often subjective and rarely not out of date (often by many months).

With respect to the liabilities the main drivers are firstly the longevity risk, and the member profile. Secondly the discount rate applied to the liability profile. Thirdly the net inflation position - what are the liabilities (particularly in times of high inflation it is assumed future payments will be rising significantly - but often schemes have a natural cap, usually 5% - based on RPI, but could be CPI - but may have hedges, typically gilts, that have no such cap, or LDI derivatives that usually do).

Longevity is a typically slowly adjusted factor by actuaries and accountants - the suspicion is the necessary adjustment due to Covid is far from complete - and schemes will vary wildly on the profiles of its members. I imagine the effects of a respiratory pandemic on change in death profiles would be greater on an aged population of coal miners for instance than on a younger cohort of office workers, say.

Discount rates will have changed considerably in recent months (as will asset prices on bond hedges). Most schemes are triennally valued - and even then the announcements are many months later. Accounts, and the funding schemes agreed with trustees are often well out of date.

It is "normal" for investors to be wary of pension deficits. It is also "normal" for those same investors to never investigate them, and consequently also normal for them to value them incorrectly.

[Charlottesquare]

Final one would be good read re notes re pension liabilities.(is there a latent issue lurking there)

To counter that (particularly as someone that has just suggested a basic understanding of tangible and intangible fixed assets) I suggest looking not just at the pension liabilities but also its assets - and certainly not becoming fixated like so many are on the deficit, which is usually the difference between 2 very large numbers, both of which are often subjective and rarely not out of date (often by many months).

With respect to the liabilities the main drivers are firstly the longevity risk, and the member profile. Secondly the discount rate applied to the liability profile. Thirdly the net inflation position - what are the liabilities (particularly in times of high inflation it is assumed future payments will be rising significantly - but often schemes have a natural cap, usually 5% - based on RPI, but could be CPI - but may have hedges, typically gilts, that have no such cap, or LDI derivatives that usually do).

Longevity is a typically slowly adjusted factor by actuaries and accountants - the suspicion is the necessary adjustment due to Covid is far from complete - and schemes will vary wildly on the profiles of its members. I imagine the effects of a respiratory pandemic on change in death profiles would be greater on an aged population of coal miners for instance than on a younger cohort of office workers, say.

Discount rates will have changed considerably in recent months (as will asset prices on bond hedges). Most schemes are triennally valued - and even then the announcements are many months later. Accounts, and the funding schemes agreed with trustees are often well out of date.

It is "normal" for investors to be wary of pension deficits. It is also "normal" for those same investors to never investigate them, and consequently also normal for them to value them incorrectly.

My language was somewhat imprecise, your approach is what ought to be done if individual companies are the young lady's penchant.

Personally I cannot be bothered wading through accounts much and these days more embrace ITs (though I do still hold Shell and Berkshire)

[Hariseldon58]

I'd suggest a Developed World Tracker, ACCUMULATION ETF eg VHVG or SWLD as the first and permanent holding. There has to be a benchmark to benchmark against.

[AsleepInYorkshire]

I would 'invest' twenty times the effort in the career chat than the investment chat.
Without the bung from you the free cash flow only comes from the leftovers from work. And the chat I had from dumb grafter working class parents put me on a low trajectory that I never recovered from.
W.

For the moderators - I know this has gone slightly off-topic but may I suggest it's still connected please. Thank you.

Thank you for your reply Wuffle. I totally agree with you. When she started at secondary school we carried on with our little incentivisation scheme. I'd noticed that at primary school she was doing very well but I got the feeling she was delivering what she could get away with. She was incentivised and she knocked the ball clean out of the park. Her results in the last year of primary school were even more incredible as we found out afterwards she had glandular fever. I'd like to think that she feels as if she is earning her JISA. And if that's correct she will protect her money. She is doing just that. We've also talked to her about discretion. She's aware that she's best not to discuss this with any of her friends. She came home one day from school and mentioned that the subject of pocket money was brought up by one of her friends. They all talked about how much they received such as £5 a week or £10 a week. She followed our advise and remained very quiet. She also said she realised how lucky she was.

When she brought her first report home from secondary school it was good. We hadn't set any targets for her. Nor have or would we. We explained to her that her report was important in future. At some point in the future she would be sat in an interview for a job or possibly further education. And if she worked consistently over the next 7 years her reports would show her commitment and discipline and personal development. We discussed her first report and suggested that she was more than capable of bringing her next report home with no 3's. A 3 being acceptable performance. Noting she did have far more 4's and 5's (5 being the top grade) than 3's. As I've said we set not targets. We outlined the value of her reports. We also told her she was in competition with no one else. We simply asked her to consider her reports as her personal best and something she could possibly improve upon with time, devotion and effort. Her last report had nineteen 5's and three 4's. The fist report was the only report with 3's on it. We've always encouraged her. We've never pushed or pulled. And all credit to her she has made the effort. Of course we have always been there in support.

We've also discussed her options when she's 18. I've explained to her that if she goes to University she may well run up a student debt. Due to long term health issues and an inability to add to my personal pension I am now in catch up mode. I am not sure we can afford to pay for her to go to University. What we have also told her is that a student loan is a debt and other than a mortgage we don't advise any form of debt. Save and pay. She wants to join the police. Our neighbour, a retired policeman, arranged for her to visit the local police station. They were very good with her and showed her the real job. She appreciated that. She has also read the various ways that she can enter the police force and wants to join at 18 and do an apprenticeship route. She's applied to be a police cadet 2 weeks ago.

Subject to the vagaries of probate and my sibling there's a possibility that my daughter will get a little something from her Grandma. Which is more than I will get

It's difficult to do what we are doing for our daughter and not worry that we are teaching her that money is "free". All we can do is place our trust in her. She has a far harder task ahead of her.

Oh ... actually I've just thought ... yes we do make one demand of her. If she feels that we, as parents, have given her the tools she needs to progress in life then please don't bother paying it back. Pay it forward and enjoy being a parent when that time arrives.

We've been looking at various investment options over the last day or two but Easter has got in the way and it's chocolate and relaxation this afternoon.

AiY(D)

[AsleepInYorkshire]

It is "normal" for investors to be wary of pension deficits. It is also "normal" for those same investors to never investigate them, and consequently also normal for them to value them incorrectly.

I need to take issue with you about this please. Seriously. This little "nugget", this little gem is fundamentally priceless. It would be totally disingenuous of me not to tell you.

We all have to be good at something. Some of us excel, perhaps without being aware of it.

AiY(D)