Private investor Mark Underdown lives with his girlfriend in New Zealand, and the couple plan to relocate to Canada next year. Underdown combines work with travel – and his international outlook extends to his investment portfolio too.
He says: “Eventually I would like not to have to work. I don’t think I will ever completely retire in the traditional sense, but I want to have some money set aside so that working is a choice, not a necessity.”
Underdown invests predominantly in equities through an ISA wrapper, and holds a range of investment trusts and direct shareholdings.
He likes the attractive combination of tax-breaks and flexibility that ISAs offer younger investors such as himself.
Pensions Less Attractive for Younger Savers
Underdown, who is originally from Basildon, is less keen on pensions, saying: “Pensions appear to have morphed into a complex tax dodge for the wealthy. I don't like the lack of control and the constant changes to the rules. I feel most people my age will probably end up with a reasonable amount in pensions anyway, via auto-enrolment.”
He currently has a “very low cost, run of the mill pension which is invested in passive investments”.
Underdown currently works as a freelance para-planner, which involves research and report writing for financial advisers. He’s also set up his own company, to help teach people how to manage their own finances.
Although he writes guides for financial advisers, he prefers to rely on his own judgement when it comes to selecting individual investments.
“I try not to listen to other’s recommendations, but do my own research instead. But we are always influenced by others, even subtly. I would never buy a stock just because someone else had done so, but it may prompt me to review it,” he shares
Investment Trusts: Good Performance and Low Fees
When it comes to investment trusts, Underdown says he likes trusts that have a history of delivering a decent performance. He says: “In general I like low fees, but I’m willing to pay more if it’s worth it. Sadly, most of the time it isn’t.”
With company shares, Underdown says he likes to take a value or contrarian-style approach, saying; “I can’t help but be attracted to something that has fallen in price and appears cheap.”
He admits his approach is not foolproof. Two years ago he bought Tesco (TSCO) shares, after prices started to slip.
“This now looks like a pretty silly decision. When Warren Buffet and Neil Woodford sell their position in a company, it is a likely sign that you shouldn't own it,” he admits. “Did I listen to my own advice? Nope. I thought, well as it's so cheap, how can it get cheaper?”
He says he’s now lost close to 13% on this holding after purchasing shares at 194p each.
Will I Have Made Money in 10 Years
“It’s an important to take a very long-term view with your investment choices - at least 10 years - so I am not selling, and it remains to be seen whether or not this was a huge mistake,” Underdown says. “Thankfully I limit my individual stock picks, and therefore my foolishness.”
Morningstar’s analysts say that there is still “uncertainty” about the future direction of Tesco’s share price. “We believe Tesco's scale allows the firm to operate more efficiently than many competitors, and its convenient locations and loyalty program should continue to drive traffic. However, we don't have enough confidence in Tesco's ability to sustain excess returns over the long term to assign the firm an economic moat – that is a sustainable advantage over competitors.”
Morningstar points out that Tesco is the largest food grocer in the UK. However the industry is very competitive, and rivalry has intensified over the past few years.
Underdown says other investments have certainly proved more successful to date.
A Volatile Ride with Russian Equities
A few years ago Underwood purchased the JPMorgan Russian Securities (JRS) investment trust and has made 17% to date.
Underdown says: “I don't agree at all with the negative western media perspective about Russia. They are facing economic challenges but I feel economic difficulties are still more than priced into the shares.
“I'm expecting this will be a very volatile, uncomfortable journey but will products approximate returns of around 10% a year over a 10 to 20 year period.”
Underdown also invests in the four-star rated RIT Capital Partners (RCP), where he says he seen a 20% gain in recent years. “I'd like it to be a little cheaper as I think it's quite expensive. But I'm not paying for annual platform fees, financial advice, or discretionary management in addition to this charge, so the drag on portfolio returns is limited and it appears well managed.”
This trust invests in global quoted and unquoted securities, and over the last year has returned almost 30% according to Morningstar. It is currently trading on a 4.5% premium.
Underdown says he has to resist the temptations to constantly tinker with his pensions and ISA: “I aim to add to these as and when I return to the UK. Hopefully by leaving them to grow over several decades they will provide a reasonable nest egg.”
