Claire Hares, a marketing executive from Surrey, has big plans for her investment ISA. Rather than saving for retirement, or to fund her children’s higher education, Hares wants this pot of money to fund a round the world trip when she retires.
I try to remember that these are long-term holdings and not get too caught up with day-to-day valuations
Hares hopes to be a “grey-age gaper” when she stops working, but as she is still in her 30s with two young children, this is still some years away.
“I know these savings may well be used up in helping fund our retirement, but it gives me more motivation to save knowing it might help me travel in future,” she says.
Hares started saving into an ISA when she started working, but it was typically only small amounts. “I started saving more seriously after we had bought our home and had children,” she said. “I do not save regularly, instead it tends to be at the end of the tax year. It’s always a bit last minute, but I usually manage to put slice of money away each year.”
Her ISA allowance is split between cash and investments held with Chelsea Financial Services.
Hares says: “I always look around to try and get the best rate on my cash ISA, but interest rates have been pretty poor for years. However I like to have some money that is easily accessible in cash, for family emergencies.”
Cash for Liquidity and Equities for Growth
With the investment ISA she is hoping for better long term returns, and has her money in a number of different funds. Most recently she invested in Rathbone Global Opportunities and says its worldwide remit appealed to her.
“At the moment I’d rather have my money in the US, Japan or other global stock markets than the UK,” she said. “I’m not sure what will happen here as a result of the EU referendum.”
Morningstar analysts say this Rathbone fund is good choice for those looking for global exposure. It has a five-star rating, reflecting its strong outperformance compared to peers in recent years. The manager, James Thomson – who has been involved with the fund since it launched in 2001 – also has a coveted Silver-medal Rating.
With a global remit of stocks to choose from Thomson narrows down the choice by focusing on a few key characteristics that only a small number of companies exhibit: for example an ability to control their own destiny. This rules out many materials firms, whose fortunes can be reliant on commodity prices, and telecoms and utility firms, where regulators can influence prices.
Hares also has shares in Henderson European Focus. This fund has a four-star performance rating from Morningstar and is run by John Bennett, who also has a Silver-medal Rating.
Bennett has many years’ experience running European portfolios. Morningstar says: “The core of the fund is invested in longer-term themes [identified by Bennett] and growth stocks trading at reasonable valuations, but tactical opportunities are also sought.”
Not all Hares’ money is overseas funds however, she also invests in Franklin UK Mid Cap. This fund is another strong performer. The manager Paul Spencer has a Silver-medal Rating from Morningstar analysts, and has run the fund since 2006.
Samuel Meakin, an analyst at Morningstar says he is “an experienced manager applying a proven process, that has consistently helped this fund to longer-term outperformance.”
Hares also holds Man GLG Undervalued Assets. This fund invests in both smaller and larger cap businesses which manager Henry Dixon, with his co-manager Jack Barrat, assess as being undervalued. The obviously hope any subsequent revaluation will boost the performance of the fund. Although the fund only launched in 2013, it has been successful to date and the managers also have a Silver-medal Rating.
Although the funds she holds are highly rated, this does not mean they have produced a consistently positive return.
“There have been a couple of times when I’ve put my money in and then seen valuations fall,” she said. “But I know there is no point in trying to pull money out, or reinvest it into a different fund. There was a reason why I picked this fund, so I know I should stick with it. I try to remember that these are long-term holdings and not get too caught up with day-to-day valuations.”
A Good Company Pension Provides Support
Hares adds that she has been lucky to have a good company pension to fall back on. She is currently in the process of switching jobs, to enable her to work school hours.
“Before that I was with my previous employer for 15 years. They paid 15% of my salary into a pension, on top of my contributions. I made sure I signed up from day one to take advantage of these additional payments. This will hopefully be a good financial bedrock for my retirement.”
She adds she is waiting to see what her new employer offers when she starts next week. Hares says she was also interested to hear about the new Lifetime ISA in the Budget, due to be launched next year. “I’m not sure whether it will be a good alternative to a pension for me, but it’s certainly an interesting option,” she adds.
