Sarah Culver, an operations manager from High Wycombe, used to be “hopeless” at saving. But she now has a more disciplined approach after saving for a house deposit.
Culver explains: “While I was at university I was hopeless at saving anything. But I realised this would have to change if I wanted to get on the housing ladder.”
After leaving university four years ago, together with her partner Culver started to save through the Government’s Help to Buy ISA. These tax-efficient schemes get a 25% top up from the Government, up to a maximum of £3,000 a year.
Culver says: “We started saving each month, and put in £4,000 to which the Government added a further £1,000. This money had to be kept in cash, but I guess that made sense as it was a fairly short-term investment.”
This savings strategy has certainly paid off, with the couple recently moving into their first flat.
Fund Picks to Supplement Cash Savings
Alongside their cash savings in the Help to Buy ISA the pair also started saving into a stocks and shares ISA.
Culver initially invested in a range of different funds. These included Fundsmith Equity and Woodford Equity Income Fund.
Culver says: “I liked the idea that the fund managers running both of these funds had a good track record.”
Morningstar analysts certainly agree. Fundsmith Equity, run by Terry Smith has a coveted Gold Rating. Smith co-founded Fundsmith and launched this fund in 2010 on the back of the success he achieved as investment advisor to the Tullett Prebon pension fund.
The fund has a five star rating, reflecting its strong outperformance against peers in recent years. Peter Brunt, an analyst at Morningstar says: “This is one of the strongest options for investors seeking exposure to high quality global equities.
“Smith's investment philosophy is to buy and hold, ideally forever, high-quality businesses that will continually compound in value.” But he adds: “Investors should be aware that this is a very high-conviction and long-term approach. There are elements of sector concentration – the approach excludes large parts of the market – and valuation risk in the portfolio. However, we believe Smith has a good handle on the risks, and over the long term will serve investors well.”
Woodford Equity Income is managed by veteran stock picker Neil Woodford. The fund has a Silver Rating. Brunt says: “Our confidence is growing in this fund. It is managed by one of the most talented fund managers in the equity income sector, and, after some initial teething problems, we are reassured to see a period of increased stability at Woodford Investment Management.”
Brunt says Woodford applies the same investment approach with which he created an impressively strong and consistent track record during his near three decades at Invesco Perpetual. This can be described as: “high-conviction, long-term, and contrarian in nature”.
The fund is managed with a total return mind-set, the object being to grow both capital and income with a keen eye on capital preservation. As such, Brunt warns, investors should be aware that there may be periods where the fund is not always the highest yielding relative to peers.
Fund that Fail to Deliver
While Culver has benefited from good returns from these two funds, it is not true of some of her other selections.
“I think we put some money into a Russia fund, but then changed our mind about this,” she said. “I was picking various funds before, but without any overall plan.”
Instead she has now outsourced fund selection to a professional, opting for Chelsea Financial Services.
She has not sold all her previous holdings though: “I’ve also have some money in Jupiter India and Pictet Water. I realise both of these are more expensive funds and higher risk, but over the long term I think these are areas that have the potential to deliver excellent returns.”
Jupiter India has a Bronze Rating from Morningstar analysts. Analysts say: “We continue to have a high opinion of the research-intensive approach applied here. Manager Avinash Vazirani has been investing in the Indian equity market for over 20 years, and has run this fund since its inception in February 2008.” The fund has what Morningstar describes as a “growth at a reasonable price” approach.
“The manager aims to identify under-researched stocks with strong growth prospects that have not been priced fully by the market. This approach has led the manager to favour mid- and small-cap names, many of which are not in the benchmark. However, he also has capital-preservation as a priority, preferring to invest in high-quality companies with strong fundamentals.”
As you would expect from a fund invested in an emerging economies returns can be volatile. But in recent years it has delivered strong growth for investors: returning 25% over the past three years. Culver says she invests monthly so hopefully this will smooth out some of the volatility inherent in such markets.
As the name suggests, Pictet-Water invests in equities issued by companies operating in the water and air sector worldwide. The fund launched in 2015 and has an environmental focus.
