Each has lost between a third and two-thirds of their value over the past year. But are we looking at long-term bargains here, or could they have further to fall?

This cheap property share comes with a student discount

Student digs provider Empiric Student Property (LSE: ESP) has ‘only’ fallen a third in value from its year high. The company reported a marginal decrease in revenue in H1 of £34m from £35.7m attributed to lower summer term lets. However, underlying growth increased 8%.

While dividends remain suspended under the fourth quarter, they are covered 159% by adjusted earnings.

Thanks to the recent A level exams debacle, a bumper crop of students is expected for the new academic year and supply of suitable properties is still limited. Bookings are only 7% below the same period last year.

Following the coronavirus outbreak, the company is seeing an increase in requests for self-contained studios and en-suite accommodation. With a successful refinancing in April the group has a strong balance sheet. It has £12m of cash and £35m of undrawn debt facilities available.

The firm previously provided a good dividend income of 5p per year. With a current price-to-earnings ratio around 15 I think this cheap property share is a buy.

London calling

West End landlord Shaftesbury (LSE: SHB) owns a 15.2 acre property portfolio predominantly in Carnaby Street, Soho, and Covent Garden.

The share price has fallen 50% in the past year and the REIT is trading at around half its net asset value.

The coronavirus pandemic forced Shaftesbury to scrap its dividend, suspend further payments, and defer rent payments for its commercial tenants. It warned that at least half its rent could be uncollected in the second half of 2020.

The firm swung to a loss this year, but I’m confident that if you take a long-term view the share price will come bouncing back and the dividends will be reinstated. The location of its properties is quite simply unique. However, it does look expensive right now on a price-to-earnings ratio of 28, and I foresee more short-term pain ahead with Brexit around the corner. A brave buy only, in my book.

A shift to working from home?

The final cheap property share on my list is Workspace Group (LSE: WKP). As the name suggests, the company rents out flexible office space mainly in London and the South East. Needless to say, this has not been a good market to be in during the pandemic.

I know that I personally won’t be returning to the office until at least 2021 and I think that the coronavirus may have vastly accelerated the culture of working from home for good. I certainly can’t imagine returning to a five-day-a-week office environment now.

The shares are down nearly 60% year-to-date. Workspace announced it had received 65% of rents due in the second quarter, down from 80% last year and customer activity was only 15% of usual levels.

I used to own shares in Workspace group, but I can’t see it being back in my portfolio any time soon. I believe the fundamental business model for the company may have changed permanently. This is a cheap property share with good reason.

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David Barnes owns shares in Empiric Student Property. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In the current environment it is increasingly difficult to find safe, reliable dividends. But I believe the two shares below offer exactly that and would be perfect to generate a passive income in retirement.

A FTSE 100 stalwart

FTSE 100 giant BAE Systems (LSE: BA) is quite literally defensive by nature and in operation. The company makes fighter planes, radar, attack missiles, warships and munitions. It is also increasingly moving into the growth area of cybersecurity.

Ethically, the defence goliath might not be everyone’s cup of tea. But its revenues are largely government backed. Its contracts are usually long term. And the firm is a trusted partner of many governments around the world. This is crucially important when dealing with intellectual property or state cybersecurity.

These factors translate to a reliable and stable income stream. While not immune to the effects of coronavirus (interim operating profits declined 10% year-on-year), the deferred final dividend from 2019 has been reinstated. A 9.4p interim dividend for H1 2020 has also been announced.

The dividend per share has been edging higher from 20.9p in 2015 to 23.2p last year. This equates to a dividend of around 4.4%. There is also ample dividend cover of around two times.

In my view, at a price-to-earnings ratio of 12, BAE Systems is a great share to own for a growing passive income. I also think there is some share price growth to come as well. The company is currently over 20% off its year-high share price.

A share I’d buy for retirement

Another share I’d buy for a passive income in retirement from the FTSE 100 is National Grid (LSE: NG.) The company owns and operates the electricity and gas infrastructure across the UK and in north-eastern America.

Unlike utility providers, National Grid has a monopoly. Given people always need electricity regardless of how the economy is performing, this means it has very reliable revenue streams.

The firm increased its dividend payment by 2.6% this year in line with its policy to grow the payout by inflation (or more). At the time of writing, the dividend is 5.6%. This is a significantly higher passive income than the 1% you can get from a savings account.

However, the company is not without problems. Dividend cover is low, although this is less concerning with such reliable revenue. It also took a £400m hit to profits due to rising coronavirus costs and bad debt, particularly from US customers. But National Grid says these declines are largely recoverable.

Most worrying is the ongoing regulation by Ofgem. It recently proposed an overhaul of the energy network that could severely limit the profit National Grid can make. However, it is worth noting that the UK accounts for only 45% of group profits.

Overall, I’m much more bullish about BAE Systems. National Grid is a bit more expensive (trailing P/E of 16) and I foresee road bumps ahead. However, were I a retiree today, I would be tempted to buy both FTSE 100 companies for a reliable passive income.

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David Barnes owns shares in BAE Systems. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

But I believe there are still some great investments out there offering dividend income. I’ve identified two property-related shares from the FTSE 250. I think both offer attractive dividends and share price growth.

Box up this FTSE 250 gem

One of the top performers in my own portfolio is FTSE 250 Real Estate Investment Trust Tritax Big Box REIT (LSE: BBOX). The company does as its name suggests. It owns huge distribution warehouses in strategic locations near main transport hubs and large cities.

The high-tech facilities are rented out by blue-chip retailers. As such, the company is not expecting many defaults on rent. It said it expected that 99% of Q3 rents should be collected by the end of the quarter. This type of consistency alongside long leases creates a very dependable revenue stream.

The FTSE 250 firm has been profiting from the shift to online shopping. As a REIT, it is required to distribute at least 90% of its tax-exempt profits excluding capital gains back to shareholders.

In a trading update earlier this month, Tritax confirmed it was cutting its H1 dividend by 9% to 3.1p per share. However, this still equates to around a 4.2% annual dividend yield. Given its REIT status, this provides some limited security to the dividend income.

The REIT is also growing, with operating profit in H1 increasing by a quarter to £70.6m. Revenue has increased from £44m in 2015 to £144m at the end of 2019. I think Tritax offers the rare combination of a safe looking dividend and growth in the share price.

Another dividend income champion

Fellow REIT and FTSE 250 member Big Yellow Group (LSE: BYG) focuses on self-storage. You may have seen its distinctive giant yellow metal boxes.

Britain is a nation of hoarders, and Londoners in particular, living in cramped, overpriced housing are in dire need of storage. Therefore, it seems a sensible business model, in my opinion, to be a self-storage company focusing on London and its commuter towns.

The company has been growing through acquisitions, developments and rising occupancy and rent rates for some time. It has 13 sites in development and recently acquired a site in Wapping for £18.6m.

Revenues and dividends per share have been edging up since 2015. A Q2 trading update confirmed that revenues advanced 2.3% to £31.8m. This was despite a significant reduction in demand from March.

As you might expect, domestic and student move-ins saw annual drops. But this was partially offset by a 28% increase in business move-ins.

The total dividend was actually lifted by 1.8% to 33.8p per share. This equates to a dividend income of around 3.2%.

With both FTSE 250 firms operating on a price-to-earnings ratio in the mid-20s, I don’t think either are bargains. But REITs offer diversity to a portfolio and the combination of progressive dividend income streams and share price growth makes both companies great buy-and-hold candidates in my opinion.

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David Barnes owns shares in Tritax Big Box REIT and Big Yellow Group. The Motley Fool UK has recommended Tritax Big Box REIT. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Investing for children: how does it work?

The government announced that for the 2020/21 tax year, the amount you could invest for children into a Junior ISA was increasing from £4,368 to a whopping £9,000.

Much like the adult version, the money grows tax-free — there’s no income tax or capital gains tax on any profit.

Only parents (or guardians) can open a Junior ISA, but anyone is able to pay into them. You can open a Junior ISA for any child under the age of 18.

There are two types of Junior ISA. Cash or Stocks and Shares. You can hold a maximum of one of each type at any one time.

Two points to note though. First, the money is locked away until the child is 18. If you think you might need it sooner, maybe another form of investment may be better suited. Second, when your child turns 18, control of the account legally passes to them.

What am I buying for the Junior ISA?

The best cash Junior ISA rate that I could find currently offers 3.25%. That’s not too bad at all especially considering adults are lucky to get 1%.

But with a near 20-year investing horizon ahead to even out any bumps in the market, I’ve opened a Stocks and Shares Junior ISA for my children instead.

With such a long investment time period ahead I’m focusing on UK growth shares for my investments. And I think the recent stock market crash has served up some great long-term opportunities.

I’m confident that FTSE 100 healthcare company Smith & Nephew can continue to grow and I think the recent crash in the Boohoo share price has opened up a good buy-and-hold opportunity.

More people are investing in their retirements and taking an interest in their own personal finances. I think listed investment platforms AJ Bell and Hargreaves Lansdown have a lot of growth ahead of them.

The last long-term trend I am investing in for my children is technology. In my opinion, AIM-listed robotics specialist Blue Prism has a huge market opportunity to grow into. And with more companies relying on data analytics and big data to inform their decisions, FTSE 100 credit rating company Experian looks expensive but could be far bigger in 20 years’ time.

Hopefully this gives you some food for thought for your own Junior ISA investments. And it should help your kids to grow up seeing the stock market as a way to build long-term wealth. You can find plenty more ideas at The Motley Fool.

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David Barnes owns shares in Smith & Nephew, Boohoo, Hargreaves Lansdown, Blue Prism and Experian. The Motley Fool UK has recommended boohoo group, Experian, and Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Anyone who has seen the film About a boy will have wondered what it would be like to earn royalties from a song. Well now there is an asset class that allows you to do exactly that across an entire portfolio of music.

Protection from a stock market crash?

Hipgnosis Songs Fund (LSE: SONG) owns a portfolio of song royalties. Merck Mercuriadis, who set up the fund, is no stranger to the music business. He has managed artists including Beyoncé, Elton John, Iron Maiden, and Guns N’ Roses.

The royalties provide a regular, reliable income stream. There appears to be no correlation between the fund and the state of the economy or the stock market. In my opinion, this makes it a great hedge against a second stock market crash.

The fund currently pays quarterly dividends of 1.25p and had earnings per share last year of 10.7p. This stable dividend of just over 4% therefore looks very appealing in the current market climate.

Hipgnosis only listed on the market in July 2018, but its portfolio has already swelled to over 13,000 songs. The company market cap recently broke through £1bn and was propelled into the FTSE 250 in March this year.

The fund owns a stake in four out of the top five Billboard songs of the decade. It also owns a stake in eight of Spotify’s top 25 most played songs of all time.

Artists and songs are too numerous to mention but include Uptown Funk and Shape of You. This month it bought the future royalties to all 197 Blondie songs.

Hipgnosis believe it can manage the songs better to maximise their income potential through video games, TV commercials, or cover versions.

Going for a song?

In my opinion, the price looks fair, but not a bargain. July financials reported an operative net asset value of 116.7p and the fund has since added to its catalogue. The portfolio has been acquired on an average multiple of 13.9 times historic annual income.

It has returned 22.7% including dividends since IPO two years ago. I think this shows the protection the fund provides from a stock market crash.

In terms of risks, I would point out that song royalties are probably not the most liquid of assets. There is also an element of being subject to popular opinion or trends. However, management insist it only invests in songs with a proven track record and reliable income stream.

I think this fund provides a great way to diversify your portfolio in an asset class that protects you from a stock market crash. If I were a retiree looking for a reliable income stream through dividends, I would give Hipgnosis some serious consideration.

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David Barnes owns shares in Hipgnosis Songs Fund. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I believe this pullback in their share prices makes both great additions to any investment portfolio right now.

This FTSE 100 company is fizzing again

Coca-Cola HBC AG (LSE:CCH) is a bottling partner of the Coca-Cola Company. It takes the concentrate and then bottles and distributes it to over 600 million customers across 28 countries.

Everyone will be familiar with its main product lines, but the company has a huge portfolio of brands including Schwepps, Costa Coffee, Fanta, and Sprite.

I see Coca-Cola HBC as a great way for UK investors to invest by proxy into a fantastic US company through the FTSE 100 without the foreign exchange risk.

The firm has been steadily increasing revenue, earnings per share, and profit for a number of years. In turn, the dividend has also been growing by around 10% a year. While not the highest at 2.6%, it is well covered, and the company has paid special dividends in the past.

This year will be a little different due to the coronavirus pandemic. In its first-half financials, Coca-Cola HBC announced that pre-tax profit fell to €167m from €261m and revenue declined by around 15%.

The out-of-home channel (restaurants, homes, and cafés) has been predictably hit hard. But the FTSE 100 firm announced that as lockdowns have eased, trade is gradually returning. I see this year as a temporary blip and would buy into a great growth story with the share price still over 25% off its year high.

Raise a toast

Speaking of fantastic brands, FTSE 100 drinks firm Diageo (LSE: DGE) can rival most. The distiller owns a number of premium brands including Johnny Walker, Guinness, Gordons, Captain Morgan, Smirnoff, and Baileys. It also produces beer and own a stake in Moët Hennessy.

This is another company that has been steadily growing revenue, profit, and earnings per share. The dividend is similar to Coca-Cola HBC at 2.7% and the firm is slightly more expensive trading at a price-to-earnings ratio of 23.

The dividend has a fantastic growth record stretching back 20 years. The final dividend was held, meaning the full year dividend edged up 2%.

Its recent financials have been well covered. Declines in revenue and pre-tax profit led to earnings per share plunging by over 50%. In my view this was to be expected given the shutdown of bars and restaurants.

But like Coca-Cola HBC, I see this drop in revenue as temporary and view the near-30% drop in share price as a great entry point for an investment I intend to hold for decades.

My only longer-term concern is that there is a growing trend in established western markets away from a drinking culture.

The company has so far negotiated this well by focussing more on premium brands that are still growing, but this is something to keep an eye on. I see the Chinese and Indian growing middle classes as key to future growth for Diageo.

If I only had to buy one, I would choose Coca-Cola HBC. But I don’t, so both FTSE 100 companies currently make my portfolio.

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David Barnes owns shares in Diageo and Coca-Cola HBC. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

What trends can we identify here and how can we protect ourselves against a future stock market crash?

Sectors thriving through the stock market crash

Any sector that is cyclical and dependent on a strong economy has performed poorly in the stock market crash. Travel, tourism, construction, oil, property, retail, banking, and leisure have all been hit hard.

Conversely, utilities might not provide much growth, but they come into their own in a stock market crash. Their dividends are dependable, as everyone needs water and electricity, so earnings are stable no matter how the economy is performing. Pennon Group, for example, hit its all-time high this year.

Healthcare and consumer durables are both traditionally defensive and have weathered the storm well. AstraZeneca is now the biggest stock by market cap in the UK. Hikma Pharmaceuticals has stormed into the FTSE 100.

Consumer durables like Unilever and Reckitt Benckiser have proven resilient partially because they sell products like soap or hand sanitizers, but also because the range of products they sell tend to be in demand regardless of the state of the economy.

Miners of precious metals have also seen their share price climb as investors pile into gold and silver. There is usually a strong negative correlation between a stock market crash and the increase in demand for gold so precious metals can act as a good hedge in your portfolio. Centamin and Fresnillo have risen 60% and 90% respectively since the turn of the year.

The star performing sector?

Arguably that belongs to technology. While not traditionally defensive, many tech shares have prospered. An astonishing fact is that the four biggest US tech stocks now have the same net worth as Japan, the world’s third largest economy.

Closer to home, video gaming stocks have been on a charge as lockdown has increased use and driven revenues higher. Codemasters and Keywords Studios are beneficiaries here.

But there are strong performers everywhere you look in technology. Ocado (online shopping tech), Avast (cybersecurity), Kainos (IT solutions). My only worry is perhaps prices have been driven too high into a bubble scenario like we could be seeing with Tesla stock in the US.

How to protect yourself

How do you avoid a future stock market crash? Unfortunately, no one can consistently predict the future. All you can do is diversify your portfolio to protect yourself as best as possible.

Most big investment sites will analyse your investments for you. The advice here is not to avoid cyclical stocks. When the economy rises, they might well be your star performers. But try to have a balanced portfolio across all sectors but also across stocks, bonds, commodities, and property.

Geographical diversification is also key. The FTSE 100 market is over 20% down from its 12-month high, but the NASDAQ is at an all time high.

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David Barnes owns shares in Unilever. The Motley Fool UK owns shares of and has recommended Tesla. The Motley Fool UK has recommended Fresnillo, Hikma Pharmaceuticals, Kainos, Keywords Studios, Pennon Group, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

As a rule, I try to build my portfolio around non-cyclical quality growth stocks, or progressive income stocks where I think the company in question has a good long-term runway of growth ahead of it.

Examples might be Smith & Nephew, Experian, Unilever, Hargreaves Lansdown, Sage or Halma. In fact, I think that’s a pretty decent growth starter portfolio. But occasionally, I get tempted into a cyclical struggling company where I think there’s tremendous value over the medium term.

This FTSE 100 bank is at an eight-year low

Shares in Lloyds bank (LSE: LLOY) fell to just 26p last Thursday. The 12-month high was 70p so the share price has tumbled 63%. Over the same period, the FTSE 100 is down by about 23%. I would expect this underperformance. They say that banks are first in and first out of an economic downturn. It’s a highly cyclical company.

The bank has announced a loss before tax of £602m for the first half. It also set aside a further £2.4bn for bad debts in the second quarter. Low Interest rates are squeezing margins and a struggling economy paints a bleak economic picture. The dividend is suspended and may not return in full for some time.

But I think this is exactly the time when you should consider buying a cyclical share. Be greedy when others are fearful and all that.

I agree with Harvey Jones that the key here is time and patience. This is a share to buy and ignore for five years. If/when the economy recovers and the dividend gets anywhere close to 3p per share again, that could be a yield of 11.5% you’re locking in.

If banks weren’t cyclical enough for you…

The other FTSE 100 company I’ve taken the plunge with is housebuilder Taylor Wimpey (LSE: TW). As you might expect, if you’re a housebuilder that can’t build houses, revenues are going to suffer.

The firm posted a pre-tax loss of £39.8m for the first half of the year. Full-year completions are expected to be around 40% down. The generous dividend (including special dividend payments) has long since been scrapped.

But I see these problems as temporary. Net cash actually surged to nearly £500m and the total order book was up 23% from a year ago. The government stamp duty holiday should also help boost sales.

As I’ve said before, there’s a chronic shortage of housing in the UK. The government has promised to build 300,000 per year. This situation hasn’t changed. A price-to-earnings ratio of eight is also appealing for this FTSE 100 builder.

As the economy begins to recover, surely the dividends will return. They were running at over 10% last year. There’s hopefully some upside in the share price as well. This is another share to buy and forget about for a few years and I think your patience will be rewarded.

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David Barnes owns shares in Taylor Wimpey, Lloyds Bank, Experian, Smith & Nephew, Unilever, Hargreaves Lansdown and Sage. The Motley Fool UK has recommended Experian, Hargreaves Lansdown, Lloyds Banking Group, Sage Group, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With screens about to reopen could this be a good time to buy a bargain, or does the Cineworld share price still come with too much risk?

The Cineworld share price has been on a rollercoaster

The firm has endured a dreadful time since peaking at 320p in May 2019. Initially there were concerns over its debt level. It acquired Regal in 2018 to become the world’s second-largest cinema chain.

But the coronavirus pandemic was crippling to the Cineworld share price. With all its 9,500 screens closed, the firm has been burning through cash. It is currently getting through $45m a month in costs, having reduced this considerably from over $100m. This is obviously awful news for a company already laden in debt.

The Cineworld share price fell all the way to 18p in March, before recovering to 100p in June. At the time of writing, it sits at just under 40p. That is quite some ride for its investors. Ultimately though, shareholders who bought in May 2019 could be nursing an 85% loss.

Are the end credits rolling?

The price-to-earnings (P/E) ratio here is just 2.6. Far from looking at a bargain, I worry when a P/E ratio falls this low. And it seems others agree with me.

According to a short tracking website, Cineworld is the fifth most shorted stock in the UK. 8.3% of its shares are loaned out by short sellers. Two new positions were added in the last week.

These are professional traders who are betting that the Cineworld share price will fall. While they have been wrong in the past, I am certainly cautious when more than 5% of a company’s shares are being shorted.

The firm has said its focus when reopening will be ‘safety first’. But this means extra sanitary costs (like protective screens, hand sanitisers), mask requirements, and reduced capacity limits. Fewer customers due to social distancing will mean no quick return to pre-Covid revenue levels.

Earlier this week Disney and Paramount announced they were pushing back major releases. These included sequels to Top Gun, A Quiet Place, Star Wars, and Avatar into 2021, while Mulan was delayed indefinitely.

During the lockdown, Cineworld pulled out of its $2.8bn acquisition of Cineplex, which would have seen it become even more indebted. However, as my Foolish colleague recently reported, even this could become a headache for the company as Cineplex is taking Cineworld to court.

Will there be a happy ending?

With agreed debt and credit facilities in place, I do not think the company will go bankrupt anytime soon. But I’m not convinced the customers will flood back either. A lot of people spent a considerable amount of time during lockdown watching Netflix. I for one, do not love the idea of watching a film in a mask in an enclosed space with so many others.

Combine the above with debt that is approaching $4bn and a longer-term future challenged by streaming services, and I still see a lot of downside to the Cineworld share price. A share only for the brave, in my opinion.

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David Barnes has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Netflix and Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short October 2020 $125 calls on Walt Disney. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I have two (mostly) lovely little boys and my goal is to build up a house deposit for each of them so they can get a head start in life. I’ve chosen to set them up with a Stocks and Shares Junior ISA.

Here’s why I made that choice and what I see as the advantages and risks.

Investing for children: How does it work?

The government announced that for the 2020–21 tax year, the amount you could invest for children in a Junior ISA was increasing from £4,368 to a whopping £9,000.

Much like the adult version, the money grows tax-free. That means there’s no income tax or capital gains tax on any profit.

Only parents (or guardians) can open a Junior ISA but anyone is able to pay into them. You can open a Junior ISA for any child under the age of 18.

There are two types of Junior ISA. Cash, and Stocks and Shares. You can hold a maximum of one of each type at any one time.

Two points to note though. First, the money is locked away until the child is 18. If you think you might need it sooner (for school fees for example), another form of investment may be better suited.

Second, when your child turns 18, control of the account legally passes to them. While I may be saving so my children can have a house deposit, they may decide instead to ‘invest’ in a round-the-world gap year.

Should I choose a Cash or a Stocks and Shares Junior ISA?

The best Cash Junior ISA rate that I could find is currently 3.25%. That’s not too bad at all considering adults are lucky to get 1%.

But with a near 20-year investing horizon ahead to even out any bumps in the market, I’m aiming to make my/their money work harder. That’s why I’ve opened a Stocks and Shares Junior ISA.

There is, of course, more risk here. But over time, the stock market has vastly outperformed cash. For example, the Dow Jones Industrial has averaged around a 7% annual return since inception. The S&P 500 is even higher at 10%.

Granted, not many people can afford to contribute the maximum £9,000 a year (and that’s per child). But assuming a 7% annual return, if you could contribute the full amount each year, the Junior ISA would be worth nearly £350,000 by their 18th birthday (not accounting for inflation). That’s quite some birthday present!

Even a more modest £100 per month can still rise to a considerable sum of over £42,000 under the same assumptions. That’s a deposit on a house for them or their university fees paid.

Now you just need to choose what to invest in for your children. But you’ve come to the right place. We’ve a wealth of information to help you decide.

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Views expressed in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro.