Like many people, Sophie Blythe considers herself a modest investor with the bulk of her savings being in cash and investment ISAs and in Child Trust Funds.
But although she is only investing modest sums each month, she is determined to maximise her returns.
Blythe and her husband moved into their current property 10 years ago, taking out an interest-only mortgage to purchase the house.
“This gave us a bit of breathing space; we needed money to renovate the property and then of course children come along,” she said
Though they meant to switch to a repayment mortgage at a later date, the couple have now started investing into an ISA, splitting the money between two funds, with a view to using this money to pay off their mortgage in a lump sum at the end of the term.
“We’ve got 20 years to invest. So we will keep an eye on how the investments are progressing,” she said. “If we have any surplus cash we chip away at the mortgage by paying off part of the capital.”
At the moment Blythe saves her money into M&G Global Dividend and Henderson UK Absolute Return fund.
She says: “I feel that we are taking a little more risk with the M&G fund, so hopefully boosting overall returns. But, as an Absolute Return fund the Henderson fund is a safer holding giving steadier returns. We want this investment to repay our mortgage, so aren’t looking to take excessive risks with our money.”
Medal Rated Funds to Pay Off the Mortgage
The M&G Global Dividend fund has a three star rating from Morningstar, reflecting the fact that it has enjoyed strong outperformance in recent years, even in market environments where income investing has been out of favour.
The fund has been managed by Stuart Rhodes for the last six years. Morningstar fund analysts have award him a Silver rating, reflecting confidence in his ability to continue to deliver good returns for investors.
Daniel Vaughan, an analyst at Morningstar says: “Despite having limited experience as a fund manager we believe he has matured into a very good investor. Since May 2014 he has run one of the biggest global equity income funds in the world.”
Rhodes focuses on liquid, large-cap and mega-cap stocks, and targets companies that are growing the absolute level of the dividend, rather than looking at the relative yield. Morningstar says it expects this process to continue to be successful.
Henderson UK Absolute Return is a more defensive fund, which uses hedging instruments and takes short positions on the market, with an aim of delivering positive returns in all market conditions.
The lead manager, Ben Wallace, has delivered on this goal. Between the fund’s launch in 2004 and 2014 it has delivered annualised returns of more than 10% a year for investors. This long and successful track record has earned him a Bronze rating from Morningstar fund analysts, who are confident in his ability to continue to produce reliable returns for shareholders.
Child Trust Funds Disappoint
Blythe says she has been pleased with the returns to date. But has been less happy with the returns on her Child Trust Funds, for her children, now aged nine and five.
“We’ve been invested in an HSBC tracker fund, but the charges of 1.5% a year can seem high for what is essentially a passive fund,” she said.
She is looking to transfer these funds to a lower-charging Junior ISA through wealth manager Chelsea Financial Services.
“We haven’t yet decided what fund to go for yet,” she admits. “I am looking to get them more actively managed. We haven’t invested regularly into them for a couple of years, so when we move I’m hoping to start contributing regularly too”.
Blythe works part-time as a project manager for a charity and said that she felt fortunate to have a pension through work.
“I don’t actively manage where this is invested, but make sure I contribute to it,” she added.
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