Nowadays, it is increasingly common for the youngest members of the household to have their own account in which they keep their money. Starting to earn money as a child is important; however, the vast majority of these hardly generate any return, so the opportunity to grow their wealth is lost. Therefore, an alternative is to use some type of investment vehicle, such as the best index funds for children, with which to increase the savings of the youngest during their path to adulthood.
What are index funds?
Index funds (also known as index funds) are passively managed collective investment schemes whose maxim is to replicate a given index, in such a way that it tracks and replicates the movements of that list of assets, including its performance. In this case, the major difference with other types of actively managed funds is that they do not try to beat the index and beat its performance, but simply seek to match it.
Advantages of index funds
- Reduced costs: The main advantage of this type of fund is that they have very low fees associated with them compared, for example, with actively managed funds. After all, they require less activity and lower personnel costs.
- They are easy to monitor: The fund’s performance is easy for everyone to check, as you only need to review the general performance of the index to which the fund replicates.
- They are easy to understand: Just as they are easy to follow, they are also easy to understand. Many even have a theme, which makes them even easier to understand for all profiles.
- They seek the long term: Normally, there is no short-term operation, since there is no manager behind them, but they simply follow the market and seek the comfort and good returns offered by investing in the long term.
Index funds for children
In short, index funds are low cost, easy to understand and follow, and stable over the long term. All of these are highly valued characteristics when looking for an investment product to put children’s money in. But for completeness, two more could be added: profitability and convenience. After all, one has to think about the fact that capital must be invested repeatedly for many years and that the higher the profitability, the more the assets of the youngest members of the household will grow. Hence, the importance of finding the best index funds for children.
The best index funds for children
The search for the best index funds for children is not easy, as there are numerous products on the market. However, to make it more convenient, we can make a distinction between those that follow SRI criteria (are socially and environmentally responsible) and those that do not.
In the first group, for example, we have the iShares Developed World Index Fund in euros, which tracks a worldwide index and has an annualized return of 12.72% over the last five years. A more exotic option, for example, is the iShares Japan Index Fund, which has returned more than 8.3% over the past five years. Finally, another of the best is the Vanguard U.S. 500 Stock Index Fund with an annualized return over the last 10 years of 10.26%, which implies more than doubling the initial investment.
In the second group, we can also find some of the best index funds for children such as the Vanguard Global Small-Cap Index Fund in euros, which replicates an index that tracks the stock market performance of small companies around the world and offers an annualized return over the last 10 years of almost 10%, which also more than doubles the initial capital.
Platforms where to find the best index funds for kids
In terms of contracting one of the best index funds for children, you have a wide variety of possibilities. Thus, you can look for this type of product in banks, in a fund management company or in one of the investment platforms available in the market. However, bear in mind that each one has its own particularities. If what you are looking for is convenience, a wide range of products and competitive prices, the best option is to choose the latter.
In Spain, the number of investment platforms is as wide as it is proven. Some of them, such as inbestMe, have a long track record, backed by the good results obtained in its more than five years of life. In fact, the aforementioned funds come precisely from the portfolio that it makes available to its clients. In addition, this offer has not stopped growing, including products for the youngest, such as its Kids Account.
The best index funds for children at inbestMe: the Kids Account
In short, the inbestMe Kids Account is the investment portfolio of indexed funds that the platform makes available to its clients, a kind of savings account for children where the minor will be the account holder and the adult (mother, father or legal guardian) will be the authorized person until the holder reaches the age of 18. However, remember that once he/she reaches that age, and after confirming a series of data with the platform, the account holder will take full control of the account and the investment deposited in it.
Among the advantages offered by the Kids Account, for example, is that of having the best index funds for children. That means investing in products such as the iShares Developed World Index Fund or the Vanguard Global Small-Cap Index Fund, which offer very high returns, allowing the child’s wealth to soar over the years. The costs are also very competitive, in line with the other products, and you can access a portfolio from as little as 1,000 euros. All this makes this product the best option for the little ones in the house.
So, if you want to benefit from the best index funds for children with reduced costs and a wide offer, choose the inbestMe Kids Account.
