Amanda Day says her priority, when it comes to investing, is saving for her daughter - now aged two.
After she was born Day says she set up a regular savings account with Halifax, paying 6%. “The interest rate certainly sounded attractive. I was putting in a £100 a month, but was disappointed to find that at the end of the year this equated to only £34 in interest.”
As this is a regular saver product, the account effectively ends after 12 months, and the money is swept into an even lower-paying savings account. Day says this prompted her to look at investment options instead.
“I top it up with what I can,” Day says. “I’m a single parent, and had a child slightly later in life, so it’s important to me to build a decent nest egg for her. As well as the money I try to put aside for her each month, I’m also looking to invest any Christmas and birthday money she gets from friends and family.”
Why I Avoided Junior ISAs
But Day says she doesn’t invest through a Junior ISA (JISA). Instead she uses her own ISA allowance. “I didn’t really want her to have access to this money at 18. I’d rather it stayed invested until she is 21 or 25. This gives me more control over these savings.”
She adds: “If I could afford to maximise my own ISA allowance each year, and put the maximum into a Junior ISA then would make sense to take out one of these children’s savings account.
“But as I can only afford to save a more limited amount at present I’d rather keep it in my own name.” It also means that should Day lose her job, for example, she could access these savings in an emergency.
However, she says that once she’d made the decision to start an investment plan, it wasn’t an easy process choosing where to put her money.
“I’ve worked in financial services for a number of years, but it’s a lot more difficult when it comes to your own money. I had to decide what platform to use, whether to opt for an ISA or JISA, then what funds to invest in. It’s easy to get bamboozled. I kept putting off making a decision as I wasn’t sure what was the best deal out there.”
Day said she finally decided to open an account via Hargreaves Lansdown. “I don’t think they are the cheapest, but they are certainly easy to use and I can get up to date valuations online.”
The Long-Term Appeal of Investment Trusts
She has split her money between two investment trusts: Henderson Smaller Companies (HSL) and Scottish Mortgage (SMT), both of which she’s held for around five months. She says she likes the fact investment trusts typically have lower charges, and many have good long-term track records.
She says: “I think smaller companies are good long term bet, and the manager has a good long term record. That said, after I invested the trust fell in value, and is looking pretty flat at present.”
However, Day says that while it can be “disconcerting” to see her hard-earned savings immediately fall in value, she knows that this is a long-term investment. “Five months is too short a time frame to evaluate this investment - I’ve got years to go yet.”
Morningstar is positive about the outlook for Henderson Smaller Companies. It says this trust benefits from two experienced managers: Neil Hermon and Colin Hughes.
It says: “The trust invests across the whole gamut of UK smaller companies from the Alternative Investment Market through to the FTSE 250. The investment approach is well established and consistently applied by a small but very experienced team and has demonstrably worked for investors. We have little concern in reiterating the Morningstar Analyst Rating of Bronze.”
However, while the UK smaller companies market has struggled a little over the last five months, Day says her other investment trust holding has raced ahead.
She explains: “I wanted a global fund which could invest in the US, Europe and emerging markets.”Since buying into Scottish Mortgage in May, Day says she’s seen a 37% return on her money. “This more than compensates to the rather sluggish start from the other trust.”
Scottish Mortgage Continues to Outperfrom
Scottish Mortgage has a four-star rating from Morningstar, reflecting its strong outperformance in recent years. Its run by the long-term growth team at Baillie Gifford, headed by James Anderson. He has a coveted gold-medal rating from Morningstar.
Morningstar analyst David Holder says: “Scottish Mortgage Trust remains a high-conviction choice for long-term global equity exposure.
“The investment approach followed here focuses on identifying high-growth companies and holding them for the very long term to gain the benefit of compounded growth. These companies will often have been new entrants or disruptors into a region or industry.”
Aside from the savings for her daughter Day says she also invests into a pension through her workplace. “Over the years I’ve also invested in various “Save As You Earn” (SAYE) share schemes. These have generally worked out really well, and I’ve owned a few company shares as a result.”
However, she says recently her holding of L&G shares lost around a third of their value, following the EU Referendum vote. “They are still worth more than I bought them for, but it is quite galling as I know what they were worth. I have sold previous shareholdings to help cover childcare costs.”
She adds: “My investments are fairly modest, but I’m hoping to add to them over the years. I’ve a good job and a nice property in Essex, which has increased in value in recent years. I’ve always been a saver and I hope to be able to pass on this habit to my daughter.”
