Eleanor Geraghty, who is in her mid-40s, is looking to re-invigorate her investment portfolio after several years’ neglect.
She says: “I have a number of different savings and investment pots, but I haven’t ever really actively managed them. I’ve simply checked statements every so often. More recently I’ve tried to take a more strategic view and started to shift and consolidate some holdings.”
This is been prompted by a change in Geraghty’s circumstances. She explains: “I left paid employment a couple of years ago to set up my own business. For the first couple of years I was just keeping afloat, but now I’ve started using some of the regular income to invest in a pension. This has prompted me to reassess other investments.”
Geraghty, who works in graphic design, has a number of investments in an ISA wrapper, plus some cash savings and Premium Bonds.
She says: “I have two tracker funds from Legal & General. I took these out when I bought my first flat, almost 20 years ago. At the time I had an interest-only mortgage so I set up a direct debit to pay a monthly amount into these funds each month with the intention that this investment would pay off the mortgage.”
Tracker Funds to Pay for Property
The two funds are the Silver-rated Legal & General UK Index Trust, and the Legal & General European Index Trust, which has a Bronze Rating from Morningstar analysts.
Geraghty says: “I made payments for a couple of years, but then stopped. At the time the stock market just seemed to be heading downwards so I was reluctant to keep putting more money into them.”
She says this money has now simply sat there for about least a decade. “The performance did pick up but I haven’t added any more to these funds. It’s a small nest egg – worth about £14,000 – but I don’t know whether I should switch it and perhaps re-invest this money into my pension.”
Hortense Bioy, director of passive fund research at Morningstar, says the Silver-rated UK Index Trust is a “worthwhile proposition for those looking to gain a broad and well diversified exposure to the UK equity market.” The fund has a four star rating, reflecting its strong performance in recent years, compared with peers.
Bioy says: “This tracker has delivered consistent above-average returns over the long-term, landing in the second quartile in 12 out of the past 14 calendar years.”
She adds that its low fees should make a further different to returns over the long term. “At 0.1% the fund’s clean I-share class is one of the least expensive within this category.”
The L&G European Index has not performed quite so well. This has a three-star rating reflecting average performance, and a Bronze Analyst Rating.
Morningstar analyst Dimitar Boyadzhiev describes this tracker as a “cheap and balanced way for UK investors to add diversified exposure to continental European companies.”
He adds: “Since inception, this fund has proved itself an accurate, inexpensive and sensible offering within its category.”
However, he says that it is slightly overweight in large caps when compared with some more active European funds. This under-exposure to smaller and mid-cap growth can impact returns, particularly in periods where growth styles are in favour.
Outsourcing Asset Allocation
Geraghty has more recently opened a pension with Nutmeg. She invests in a portfolio of ETFs, tailored to her own investment risk.
She says: “I am looking at a least a 20-year time horizon, so I’ve opted for one of their more adventurous profiles. I’ve only be invested for about a year, but it has done well to date. I put in about £500 a month, and it is surprising how this soon adds up.”
She has also recently used her ISA allowance to invest in new funds, adding: “It has been about 10 years since I’ve invested in an ISA so I wanted to start building some longer-term savings again.”
Geraghty says she has again chosen passive funds for this pot.
“Given I already have some exposure to the UK and Europe I’ve opted for HSBC American Index fund and Vanguard Emerging Markets.”
This HSBC fund earns the top quantitative and qualitative ratings; a five-star performance rating and Gold Analyst Rating. Analysts point out that it is difficult for active managers to outperform the S&P 500 index, so taking a low-cost passive approach can make sense.
Geraghty says she has been “less happy” with her emerging market fund. “I don’t put too much in as it is a high-risk option, but returns have been more patchy, although I’ve only be invested for a short while.”
This fund has a three-star performance rating, denoting average returns, and a Bronze Analyst Rating.
