Hello,
We’ve just been gifted our first grandchild ( hoping for many more) and want to ask about some low risk investment options that offer reasonable returns as we want to be able to contribute to their education in years to come. What options would people recommend, thank you.

Hi Sally,

Risk and return are related. If you want 'low risk' then you have to accept a 'low return'. Any investment that is offered as a 'low risk, "reasonable" return' is dangerous.

You want to contribute to thier education - that could be primary school, high school or tertiary education. If it is the later, then you will likely be investing over a fairly long time horizon. So, you probably want to invest in a low cost, diversified portfolio of Australian and Global stocks. Sure, there is "risk" that the value in any given year will go up and down, but providing you remain diciplined, you'll be rewarded with a reasonable return over the long term.

Many people, in situations like what you've asked about, will jump straight to insurance bonds as they are internally taxed at 30% so no individual has to pay tax on earnings or capital gains when you sell it. The problem is the capital gains tax internally within the insurance bond is 30% with no CGT discount that individuals recieve so it's generally best to just invest in your own name.

Get in touch if you would like to discuss further.

Cheers

Glenn

Hi Sally,

Look for something low cost from the likes of Vanguard, they have a range of different options to address your low risk concerns.

Contribute to it early then just set and forget.

All the best.
James