Andrew Hargreaves, who works as an IT engineer in Wales, is looking to invest a significant proportion of his salary, with a view to retiring early.
He says: “I’m not looking to retire a year or two early. I’m 30 now, and if I maintain my current savings rates I’d hope to be able to be financially independent within the next 10 years.”
Hargreaves says: “I’m a big fan of the so-called FIRE approach”. This stands for Financial Independence Retiring Early, an online movement where people aim to save more, around 50% of their salary, and spend less, so they no longer have to work for a living.
Hargreaves has only been investing for around three years, but has clear goals – investing to build a pot which would provide him with financial flexibility and freedom.
As well as investing as much as possible, Hargreaves tries to maximise his earnings. He says: “I am taking on a bit more risk with my career, changing fields and cities to pursue opportunities that I wouldn’t have been able to follow if I didn’t have this savings safety net.”
Hargreaves invests on a monthly basis, regularly reviewing his spending. “If I find I’m coming to the end of the month with more money leftover I increase my regular investments,” he says.
“I like to have the money leave my account as soon as I get paid so it’s as if it was never there.”
Making the Most of Tax Wrappers
In order to maximise returns Hargreaves has invested in his company pension to “ensure I get the contributions for my employer, and the tax relief”.
“I have switched jobs a couple of times so have transferred previous workplace pensions into my SIPP, which is held with AJ Bell. I’ve also paid into an additional voluntary contribution plan with employers in the past as a way of forcing myself to save more,” he explains.
“But as I’m now more confident managing my own investments, I only contribute into the workplace scheme what is matched by my current employer – and I invest more elsewhere.”
Help to Buy and Lifetime ISAs
Hargreaves has also paid the maximum into a Help to Buy ISA, and has since opened a Lifetime ISA to make the most of this allowance too. Both ISAs offer a 25% Government top-up on contributions, but as savers can invest more into a Lifetime ISA at up to £4,000 a year this bonus is potentially worth far more. In addition, these funds can be invested in stocks and shares.
When it comes to his underlying investments Hargreaves says he keeps all his money in passive tracker funds. Hargreaves currently invests his SIPP and ISA in a range of Vanguard Lifestrategy funds. These include Vanguard 100% Equity and Vanguard 60% Equity.
Vanguard LifeStrategy 60% Equity Fund has a coveted Gold Rating from Morningstar, and a five-star performance rating. Morningstar analyst Randal Goldsmith says: “Vanguard LifeStrategy 60% Equity is a strong offering for investors seeking a low cost moderate allocation fund.”
This fund is part of a range of five fixed-allocation funds. Launched at the end of June 2011, this UK range follows the same approach as the longer-running US version, whose funds each have a Morningstar Analyst Rating of Gold.
Goldsmith adds: “As with the US version, asset allocation is implemented using Vanguard’s passives to minimise costs. Most of these underlying funds are rated positively by Morningstar’s fund analysts, and close to a third of them have Gold ratings.”
Vanguard LifeStrategy is a global large cap fund, which invests in a diversified spread of trackers.
Hoping for Investment Discipline
Hargreaves has had a varied career: he studied law at university, then worked in retail, before retraining as a mortgage adviser in his spare time, before having the opportunity to work in IT.
Hargreaves says: “Since I’ve been investing I’ve enjoyed particularly good returns.” As he points out he has been lucky enough to start investing during a period of strong stock market gains. “As most of my investments are overseas, the hit to the exchange rate for sterling gave a decent boost to my investments around 18 months ago, following the EU referendum.
“My only hope is that I am disciplined enough to hold when the market inevitably takes a downturn, whenever that will be.”
