ADVISERS recommend investing in wine for children as part of a balanced portfolio that includes equity funds, savings accounts and child trust funds (CTFs) — although the latter are open only to children born after August 31, 2002.

We have put together some tips to get the best returns:

I want to take a 20-year view of investments for my children, so what is the best approach?

One of the advantages of investing for children is time, as they do not usually need the money for several years at least. Many advisers with young children put money aside for them in a mixture of what appear to be risky investments, such as emerging-markets funds and alternative investments, including wine, stamps and commodities.

The theory is that such assets will go up long term, despite big ups and downs in the interim.

But I will need a good profit on the money to send my children to university. How can I guard against a last-minute collapse?

The best tactic is gradually to take profits on risky investments and move them into more conservative assets such as bonds or bank deposits. This is known as “lifestyling”, and ensures a good appreciation, even though you may miss the absolute top of certain markets.

My children qualify for the child trust fund. Where should I invest their vouchers?

There are three types of CTF: deposit accounts, “stakeholder” equity plans and “non-stakeholder” equity plans.

Stakeholder CTF plans initially invest at least partly in equities and gradually switch to less volatile assets after 13 years to cut the risk of a heavy loss close to maturity. The charges are capped at 1.5% a year and you can pay in from £10 a time.

Anna Bowes of Chase de Vere, an adviser, recommends F&C’s stakeholder CTF, which tracks the FTSE All-Share and charges 1% a year. Among non-stakeholder CTFs, she favours The Children’s Mutual, which offers a choice of 16 funds.

However, while no adviser would advocate ignoring CTFs, many believe that parents should invest any extra cash in ordinary equity funds, rather than topping up the government funds in their children’s CTFs.

Patrick Connolly of John Scott & Partners, an adviser, said: “The best place to save for children depends on your circumstances. But if the investment is for 18 years it makes sense to invest regularly in equities. For additional contributions or for those children not eligible for CTFs, a standard equity investment may be preferable. This is because there is a limited range of CTF funds and few would really be worth considering in an open-market environment — even though charges can be lower.”

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