Sarah Knighton started investing almost 20 years ago, following a job move. She wanted to take advantage of her new role’s workplace pension scheme, because she did not want to miss out on employer contributions. But when Knighton switched to a new company she reinvested this pot of money into a SIPP.
“SIPPs were relatively new at the time. It gave me a lot more flexibility on where to invest my money,” she said: “I found that with my company pension the contributions all went into one generic scheme, and I found it difficult to tell where this money was invested, or how it was performing.”
Knighton, who is now in her 40s, works as a general manager in the insurance industry. She has moved jobs several times in the last few years, and each time has moved she consolidated these company pensions into her SIPP.
She adds: “I’m not an expert, but am reasonably well-informed about financial issues. Investing in SIPPs has meant I have done research and looked at different investment options.”
Keeping Investment Costs to a Minimum
Knighton, who lives in Oxfordshire, is predominantly saving for retirement, but also invests in ISAs, as well as share save schemes. “These might not be such long-term investments, but hopefully they will give me a bit of flexibility about my finances, and provide some sort of financial safety net, should I ever need it,” she says.
Knighton is keen to keep investment costs to a minimum, and for this reason she has tended to focus on ETFs in recent years. She mainly invested in ETFs provided by iShares, saying: “To me these seemed to be the ideal way to access different markets, whether it’s the FTSE 250 or the S&P 500.”
Globally Diversifying a Retirement Portfolio
Knighton started with a couple of UK and US equity ETFs, and then decided to diversify: “I realised I still had quite a few years to go before retirement so I wanted to be a little bit more adventurous with my investments.”
To this end, Knighton invested in an ETF tracking the Japan market, one tracking the gold price and another tracking stock markets in the BRIC economies of Brazil, Russia, India and China.
She says: “While I was comfortable taking a bit more risk with my money, these weren’t necessarily the right investment decisions at the time. They all turned out to be very rocky and started falling significantly in value after I invested.”
Knighton invested in the iShares Physical Gold ETC (IGLN) after several years of rising gold prices. But during 2012 the gold price peaked, and after a volatile 12 months prices fell fairly consistently between 2013 and 2016.
Knighton says: “Eventually I decided to sell this holding, which did mean I made a loss on the investment. Fortunately, I had only invested a relatively small amount of money.”
She added: “I’m comfortable buying ETFs that invest in the FTSE-All Share or S&P 500. But I realised I simply don’t have the knowledge – or the time to do the proper research – when it comes to investing in riskier areas of the market.
“I concluded that while I was probably right to look for investments that were a bit more exciting, I was almost certainly the wrong person to choose what these should be – and how much I should invest in them.”
Investing Help from the Professionals
As a result, Knighton decided to get help building a more diverse investment portfolio. She says: “I looked at getting help from a financial adviser or wealth manager, but the size of their fees mean it’s not cost-effective with a portfolio of my size.
“If you’ve got a portfolio worth several million then it would be great to get personalised advice and a tailor-made portfolio. Unfortunately, advice fees of 1%, plus platform fees and underlying investment charges means this doesn’t seem a viable option for someone like me.”
Instead, she switched part of her SIPP into the Vanguard LifeStrategy 80% Equity Fund.
This fund has a five-star rating from Morningstar, reflecting its strong performance in recent years against peers. This is a global fund which builds a growth orientated portfolio, that is 80% in equities, 20% in fixed income.
The Vangaurd managers decide the allocation across different equity markets, and invest in them through a mix of low-cost ETFs and Vanguard’s own passive funds. This has helps keep costs to a minimum: ongoing charges on this fund are now just 0.22%, following Vanguard’s decision to trim fees again in January this year.
Knighton says: “Vanguard has a good reputation. I liked the fact that this is a mutual company, so seems more geared to delivering good returns for its customers rather than enriching shareholders.”
This investment is managed through her AJ Bell SIPP. She has also invested some of her existing savings into a pension and an ISA run by Nutmeg. Knighton says: “Here I select the risk profile I wanted, but I am not making the decisions on asset allocation within this risk profile.”
This has enabled her to have different profiles for her pension and her ISA, which she says is investing over a slightly shorter time-frame. She adds that she has be pleased to date with the returns from both these investment options.
Company Share Save Scheme
Elsewhere Knighton has built up a “reasonable portfolio” of shares in the company she works for. These are usually three-year savings plans, allowing employees to buy company shares at a discount.
Knighton adds: “I’ve participated in several of these schemes. In most of them I’ve seen the money I’ve invested almost double in value, although it does depend on stock market movements over this period.”
Knighton says she is wary of putting all her eggs in one basket. But says she is confident if she holds the company shares for the long-term she will see a decent return on her money.
