Lawrie Jones says he started to take pension savings more seriously after setting up his own business. “Previously I had a workplace pension that I didn’t need to think about,” he said. “Now I run a business, I’m in charge of my own pension. In the beginning it was a challenge, but actually I’m now enjoying it.”
He’s been investing in a SIPP for around five years, and a stocks and shares ISA for three years. “My plan is to save as much as I can, conscious in the knowledge that business can – and often does – throw up an awful lot of challenges.”
“My pension investment provides solidity for my retirement, the ISA a safety net should things change. I now have enough savings in cash so I can invest for the longer-term and accept a little more risk, with the hope of generating better returns.
“It’s increasingly important for me to save as myself and my wife will soon be welcoming a new arrival to the family – and I’ve been told that children can be expensive!”
Jones set up his own communications and marketing called 42group which specialises in the science, tech and healthcare sectors. Although he did not have any specialist financial knowledge, but has learned through experience.
Single Stocks Prove Slippery
“I began investing in single blue chip shares, but quickly realised this was a poor idea because of the changeable nature of the market and the transaction fees involved,” explained Jones.
“I actually made a reasonable return with BP (BP.) shares only to see them lose approximately 20% in value very quickly. The investment was a reasonably small amount of money - but it taught me that single share investing wasn’t a great idea.”
Jones, who lives in Bristol, has since switched his investments into funds. “I invest very highly in equities, with around 80% invested that way. My approach is to spread risk geographically, so there’s exposure to all markets.”
He says he now tries to avoid “home-bias investing” after realising initially that he had a tendency to concentrate all his portfolio in UK-based investments.
This approach has proved to be much more successful, delivering sustained returns. He says in recent weeks this has helped protect his investments from any Brexit fallout.
Passive Funds for Global Exposure
To invest globally, Jones says he primarily buys passive funds, which track different overseas market. But he does also holds a handful active funds where the manager has a good track record. He says: “The cult of personality in investing is interesting, but can bring variable returns. I usually read the financial pages and have a punt on recommended funds, but returns have been mixed.”
Two of the best-performing funds in his portfolio reflect this twin-track approach.
He says: “My Vanguard FTSE Developed World ex-UK Equity Index is showing a 37% return. While Woodford’s Equity Income fund is a solid 25% up after purchase at launch.”
Morningstar gives the Vanguard fund a coveted Gold Rating. Morningstar analyst Monika Dutt says: “This index tracker offers a cheap, high-performing way to access developed-world ex-UK exposure. The fund management process is geared towards delivering index returns at the minimum possible cost.
“The source of Vanguard's competitive advantage and the foundation of its culture is its mutual ownership structure. Fund shareholders own Vanguard through their funds, compelling the firm to operate at cost rather than for profit and ensuring that investors’ interests come first.”
Morningstar is also very positive about CF Woodford Equity Income. The manager Neil Woodford has a Bronze Rating.
Morningstar says: “Neil Woodford's eponymous fund offers investors what they would expect from one of the United Kingdom's most talented and experienced equity-income managers. He has 34 years' investment experience and has run UK equity-income funds in this style since 1988.
“The strategy of this fund is clear: [it has] the objective of growing the income over the longer term, while offering capital preservation. His long-term track record that encompasses numerous market cycles is strong; Woodford has proved to be a good steward of investors' capital.”
Learning to Deal with Price Volatility
Jones says he felt less confident in his holding in Woodford’s fledgling investment trust: Woodford Patient Capital (WPCT).
He says: “I was happy to watch it increase in value, but less pleased when it started to drop. Thankfully I was able to sell before it plunged and broke even.” Over the last year shares in this newly launched investment trust have fallen by 23.37% according to Morningstar. Shares are currently trading at around 91.p, below the £1.14 peak these shares reached shortly after launch.
More recently Jones says he’s invested in Chelverton UK Growth - a fund that invests in smaller and mid-sized UK companies, many of which are listed on AIM. He says: “This was one of the funds that was widely tipped in the financial pages last year. It’s doing OK, but compared to others it reinforces my view of the benefits of passive investing.”
Jones says he holds invest his ISA and SIPP through Hargreaves Lansdown. He said he initially invested through the company because the owner, Stephen Lansdown, is also the owner of the football team he supports, Bristol City FC.
He says: “People say it isn’t the cheapest but I’ve got no complaints. It’s been a great service.”
What funds are in your ISA or SIPP? What have been your most successful investments to date? If you'd like to feature in Investment Views and tell us about your investment strategy please contact the Editorial team on UKEditorial@morningstar.com
