This question could be debated until the cows come home.
Top of my head, in a nutshell response - emerging markets for your daughter, or a global fund or investment trust (lower costs). Aberdeen and First State (funds) are top performers as is Templeton (trust) long term.
For you and your wife - more complicated, endless possibilities!
£10k per year is 5 x £2k - the makings of a nice, well diversified portfolio.
Diversification is important, as is the compounding effect of dividends, and not least the long term effect of charges.
Tracker funds have very little cost, as do ETFs, investment trusts come next, then unit trusts - but you could go mad considering all the permutations of a proposed portfolio.
It's an educated gamble on the future anyway, so my opinion would be to stick with rated and regarded managers and get stuck in.
Good UK Equity Income fund or funds (to diversify sectors), or growth and income investment trust(s), ditto global/emerging market/flexible income fund/trust, emerging market growth fund/trust, and a fixed income element (such as M&G Optimal or Jupiter Strategic for example).
Happy to enlarge, but I cannot guarantee I know what I'm talking about.
Regards.

Even if you have the £12k available to invest right now, there is an argument that you should drip feed your money into the market. You also have the choice of making monthly investments into funds/trusts (normally minimum £50 I think?), or doing it in lump sums - normally minimum £1000. So, you could do either depending on how available your cash is and which funds/trusts you fancy.
Funds are convenient and easy to understand, investment trusts are harder to get your head around but are generally cheaper and can do better for several reasons. Somebody somewhere once said something like; 'funds are sold, investment trusts are bought'.
By Liontrust I don't know if you mean the income fund or special situations fund - I don't know about the income fund, but I have about £10k in the special situations fund and add £250 to it per month by direct debit; it is a top performer, the managers are highly rated and it gets frequently recommended; I think the TER might be on the high side if I remember right, but you could argue it is worth it.
Don't rule out investment trusts, if you have a little bit of time to read up on how they differ to funds - or trackers for that matter (fairly uncomplicated). I invest mainly in funds with a few investment trusts but am moving more towards investment trusts for the future.
It is easy to get bogged down by the decision making process, the more you look the more bewildering it can be, which is why I said make a decision and go for it. My opinion would be identity a fund/trust you like the look of and get started - one step at a time. If you choose a fund/trust with a rated and regarded manager who has a good track record you stand as much chance as anyone of doing alright.
Hope this helps, remember I am just a fellow DIY investor and could be talking rubbish!
Regards.

Thanks for your help TJL, I'll have a read up on the funds and take action.

Thanks again

Matt

Hi
I am a self-taught investor who has learned the hard way by trusting others. I had to wise up quickly after having lost money over several years through professional managers and managed funds.
I can honestly say that the best investments are shares. The best shares are consumer goods companies who have brands with pricing power. Its what has made Buffett his fortune.
I would suggest buying in equal proportion Unilever, Reckitt Benkinser, Diageo, Nestle.
All these companies are either the biggest or second in all their markets. Their profit histories are of consistent growth (extrapolating exceptional items ,sales of businesses etc). They keep going up over time as do their dividends. They are so well spread around the world and generate huge free cash flows that they can grow by price increases and by acquisition -a position most businesses can't.
They area not cheap -but thats because the best quality isn't. If you invest consistently over time you will average out your investment cost and measured over time you should make over 10% per annum or wait for some dips in the market -the US fiscal cliff early next year might be one .
So if you want the safest investments with a broad geographical spread in growing markets I would strongly suggest you invest in these. Its high returns on assets that makes a great company.
I have .For example my Nestle shares bought 12 years ago have triple and the dividend is now 12% of my investment. i have no reason to believe this won't continue.
Am alternative is to invest in Fundsmith -run by terry smith .Invests the same way but you pay him 1% per annum. I have some for my kids.

Hope that helps
Ps Don't buy utilities or energy companies whose pricing power is limited by legislation or commodity prices.

If you truly consider yourself a long-term investor, and I mean really long-term i.e. at least 25 years plus, in addition to opening a Junior ISA you may also want to consider setting up a low cost SIPP for your daughter and deposit up to the maximum each tax year and benefit from the free contributions offered by subsequent governments (get your family involved in funding both accounts; both JISA and 'Kids' SIPP's are great ways to minimise inheritance tax - you see I am thinking really long-term here i.e. trans-generational!)

For more on this read: A Little Savvy Report on Helping Your Children to Get Rich at at http://www.littlesavvyre...r-children-to-get-rich/ - a present each grand parent should consider giving to their adult children for Christmas in order that their grandchildren are spared from years of financial struggles and at the same time become money savvy.

As a long term dividend income investor, I primarily invest in high quality dividend paying companies when they are historically undervalued as well as are financially strong based on our in-house developed dividend share valuation and financial strength investment methods at Dividend Income Investor.com

Successful long-term dividend income investing is depended on the price at which you buy your dividend paying shares and re-invest those increasing dividends in the same and/or similar high quality dividend paying companies, but only if and when they are historically undervalued. This mean you may not invest in new companies for periods if and when none of such companies are around. Also re-read the contribution, above, of the writer talking about his investment in British American Tobacco.

Instead, many investors buy shares when they are 'safe' and therefore by definition 'expensive'. generally, the end result is that you are unlikely to generate good long-term returns when you invest in shares when they are not priced 'right' (based on our long-term historical undervaluation perspective).

Unfortunately many investors do not focus on the price of shares they buy. Instead they get seduced by the media, etc regarding companies with a low price earnings ratio. Always remember that earnings do not provide you with any information whether a company is truly 'profitable' - cash rich - and, are able to pay and increase its dividends on a regular basis (preferably) above inflation rate.

If you don't need the dividends now, re-invest those dividends on a regular basis in such a way that you incur low trading costs i.e. forget about drips etc if your dividend income is limited as the cost of reinvesting is exorbitant; rather gross all your dividend income and wait for the next historically undervalued dividend paying company to have a temporarily bad period or when there is a substantial drop in share prices because the market is generally selling off, and consider buying but only if that/those company(ies) has(ve) the financial strength to turn around.

Steven Dotsch
Managing editor
Dividend Income Investor.com

Thanks for all of the great information here everyone.

I'm looking for long term investments here (25 years for my daughter, 20 years for me and my wife).

I now realise the power of compounded interest but I'm unsure of what is the best investment for this now.

How does compounding the growth and dividedend payments compare against compounding the growth of funds?

I like your site Steven Dotsch, and I'll be interested in your service if I do go down the shares route because if I'm honest I have no idea what I would be looking at to pick a good share.

Thanks for your advice everyone,

Matt

Hi TJL

An introduction on the benefits of dividend re-investment is here at: http://dividend-income-i.../dividend-reinvestment/

Long-term, re-investment of dividends in the same or other (historical undervalued) dividend paying companies allows you to grow your portfolio from which you secure income exponentially, as the example on British American Tobacco in the link shows.

Of course, the best results of such a strategy are secured if one would be able to re-invest ones dividends if one is able to re-invest at a price when the shares of the particular company are below the initial purchase price.

Thanks, I understand about compounding dividends, but was confused about compounding the growth? You buy x number of units in a fund or shares in a company and they rise or fall, there's nothing to compound?

Let's start with the choices, unless u are prepared to monitor your investments single shares are a no go area, remember safe investments as BP, Royal Bank etc., where investing in safe yielding shares would have used up all your other dividends received for years to come.

Unit trusts > charges will use up most of your first year's dividend so unless u are willing to forgo the first year's dividends, maybe another no go area.


Investment Trusts that are managed to provide a progressive dividend may be an option although whilst u will receive the dividends yearly the capital invested will fluctuate could and will most probably decrease more than the dividend. So once committed only for the long haul, so for any capital that u will not need to touch.

Lets look at the Edinburgh UK tracker

Edinburgh UK Tracker Trust PLC 8.90 7.90 7.85 10.35 8.65 7.65 6.50 5.70 5.40 3.38

the last eight year dividends paid, u will notice the progressive dividend policy until four years ago when they had to decrease the amount of dividend paid before starting to progressively increase the dividends. Current yield 3.38%, timing is important if u had been investing at the bottom of the market u could have locked in a yield of 5% which should progressively increase.

Another thing to consider, lots of Investment Trusts are still not got back to the price they were in 2007 and some not back to the prices in 2001, so timing is important, unless u are lucky with your entry point. If u want to receive the dividends to spend maybe a way to go, depends on your view if interest rates will return to normal in a couple of years, u may have left it too late to buy with the view of re-investing the dividends.

U will find generally that any Investment Trusts that pays regular dividends and increase their share price the yield is lower than the less well managed trusts, although a well managed trust can become next years less well managed trust and vice versa.

Good luck with your search, u will find it difficult as most safe sources of income have already been bought up and the returns now are dire.

>>>>>>>>>>>

I've posted the above on the wrong link, but my answer to your question would to be to invest in a general Investment Trust that has a progressive dividend policy and re-invest the dividends in the same share when u have enough to invest. This way u will receive dividends when the market is falling and u will be able to take advantage of cost price averaging.