Patricia Trudgeon has an international outlook when it comes to her working and family life, as well as her investments.
She is a French national but lived in the UK for 20 years before moving to Dubai a decade ago with her husband. They hope to retire back to the UK within the next five years.
Living abroad does have it complications however, particularly when it comes to financial matters. Trudgeon explains: “When we moved to Dubai in 2009 we sold our house and invested the proceeds through our bank. It was an actively managed portfolio of funds, equities, bonds property and cash. But in 2016 the bank decided to close their offshore portfolios, so we had to invest the proceeds with another wealth manager.”
Although they had to transfer their investments, the couple stuck with the same equity holdings within this portfolio.
These equities largely consisted of blue chip shareholdings that were yielding decent dividends. This included shares in HSBC (HSBA), Royal Dutch Shell (RDSB), Lloyds (LLOY), BT (BT.A), BP (BP.) and British American Tobacco (BATS).
Trudgeon says this has proved a savvy investment decision: “We needed income to help pay our son’s school fees in the UK, so this proved to be a good decision.”
What the Analysts Say
Morningstar equity analysts note that HSBC is making good progress with its restructuring, and awards it a narrow moat rating, mean they believe it has a slight competitive advantage over peers. Its current share price is marginally below its fair value estimate of £7.04 per share.
Royal Dutch Shell has a four star rating from Morningstar equity analysts, meaning they consider it undervalued. This oil giant is well positioned for a lower oil price world, according to Morningstar analyst Allen Good.
He says: “With the restoration of its cash dividend Shell has demonstrated that it has taken the necessary steps to remain competitive in a world of $60 for a barrel of oil.”
He points out that the company has reduced its cost base by reducing the company’s headcount and improving its supply chain. However, the company does not have an economic moat. Its share price is currently below its fair estimate of £28.
Trudgeon also invests in AA (AA.) and BHP Billiton (BLT).
Investing for Income
While some of her investments have made capital losses, they have still performed well for their purpose – yielding a decent dividend.
Trudgeon says: “Our son, who has special needs, will return to live with us next year and we are planning to re-invest these cash dividends. We cannot simply elect for dividend reinvestment as we live abroad.”
In a similar vein, the couple can’t add further contributions to their ISA accounts while they are living abroad.
She says: “When we lived in the UK we took advantage of tax-free savings accounts and managed the investments ourselves.
“Although we can no longer add monies to these accounts we are keeping an eye on the investments. We do receive the dividends they pay.”
Gold Rated Fund Picks for a SIPP
Trudgeon invests for both her SIPP and ISA through AJ Bell. In her ISA portfolio, she has again chosen a number of blue chip shares that pay decent dividends. These include Royal Dutch Shell, HSBC, SSE (SSE) and GlaxoSmithKline (GSK).
But when it comes to her SIPP, Trudgeon has opted for funds instead. “My preference is always to invest into lower cost funds, whether they are trackers, or actively managed funds.
“I do a lot of research on the funds beforehand, and use comparative fund ratings from the likes of Morningstar. I try to stick to four or five stars performance rated funds ideally – and will pick those that have at least a Bronze medal rating.”
She adds: “We use this portfolio of funds to gain exposure to the US, UK, Europe, Asia and Japan, but we keep all out investments in sterling.”
Current holdings within her SIPP include LF Lindsell Train UK Equity, Schroder Asian Alpha Plus and iShares Core MSCI Japan ETF.
Lindsell Train UK Equity has a coveted Gold Rating from Morningstar, plus a five-star performance rating. Over the past 10 years the manager, Nick Train, has delivered an average annual return of 14% to investors.
Morningstar fund analyst Simon Dorricott says: “This remains amongst our highest-conviction funds because of its experienced manager, well-defined and consistently applied investment approach and competitive fee structure.”
Train looks for unique and high-quality companies that offer a high and sustainable return on equity, show low capital intensity and are cash generative.
Dorricott says: “The result is a concentrated portfolio with clear biases relative to peers and the index. However, this process has led to strong absolute return and unusually consistent relatively returns over the medium to longer term.”
Schroder Asian Alpha Plus is another five-star performance rated fund, this time with a Silver Rating. It has also delivered high returns for investors in recent years. Over the past decade it has delivered average returns of 12% every year.
Morningstar analyst Lena Tsymbaluk says: “We view this fund as a sold long-term offering. We have a high regard for this fund’s manager Matthew Dobbs who is a seasoned investor with a sound process that he has diligently followed for many years.”
Trudgeon says the couple hope to retire to Devon where she hopes to continue teaching sailing to special needs children and young adults as she is doing Dubai. She hopes this investment portfolio will provide for both her and her son’s future.
