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LIFESTYLING WITHIN A CTF AN OPTION THAT MAKES THE DECISION FOR YOU
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As mentioned earlier, Option Three the Stakeholder Account, involves a process called Lifestyling. This is where the *provider* of your childs CTF invests the money on behalf of your child in a mix of *shares*, *bonds* or *cash* depending on how close your child is to 18. The example below explains how a Lifestyling investment strategy might work: Example of Lifestyling within a Child Trust Fund
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In this example, any money that is put into your childs CTF is immediately invested in an *Investment Fund* that invests in shares, as these are likely to provide the highest *returns* in the long run. However, because the value of this fund is also likely to go up and down a lot in the short term, your childs money is moved out of these investments and into less risky investments as they approach 18. This is to lessen the likelihood of the value of their CTF dropping just before they cash it in. In this example, the safer investment is an Investment Fund that invests in bonds, but the *manager* may also choose to move into cash. This depends on the CTF providers strategy, which you can ask the provider about before you sign up. |
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