Now that Paul Webster is semi-retired he has more time to look after his investments. Webster previously worked as a mortgage adviser, so it is not surprising he has a significant amount of his wealth tied up in property.
He explains: “As well as our own house, we have a three buy-to-let properties. One of these was my father's home, which we inherited after he passed away. But over the past decade we’ve also invested in two smaller city centre flats, in the Bristol area.”
These flats have proved to be a good investment, with significant capital growth and decent rental yields. He says: “There is obviously the hassle factor with property: you need to maintain it and ensure you have decent tenants. But to be honest we’ve not had too much trouble renting them.”
Webster plans to sell the flats in the next decade, when he expects he will need more ready money.
“The rent generated gives us a bit of additional income, but property is not a very flexible investment when it comes to retirement. I can’t just sell off a chunk of the gains I’ve made.”
He points out that these investments are less tax-efficient that they used to be, thanks to regulatory changes. “If interest rates go up significantly then that might be a cue to sell. Fortunately, I bought before they made changes to stamp duty changes so haven’t had to pay these higher rates.”
Pension Planning
As well as his property portfolio, Webster has a number of workplace pensions, which he has consolidated into a SIPP.
He says: “The new pension freedoms have certainly benefited people of my age. I had a couple of older work pensions, plus some ISAs holdings. One of my work pensions pays a relatively small final salary pension. The others I’ve now consolidated within a SIPP.”
Webster is not currently taking an income from his SIPP. “The State Pension, along with my final salary and the rental income covers our day-to-day spending.”
Backing the UK
Some of his largest holdings in this SIPP are UK equity funds. He says: “It strikes me that the FTSE 100 is a very international index. But I don’t have all my money in these larger multi-nationals, I also have investments in smaller and mid-cap funds.”
These funds have done well over the past year, and Webster remains confident that they will continue to do so. “There seemed to be a lot of people switching out of the UK following the Brexit vote, but there has been quite an uplift in the UK market since then.”
Webster owns a mix of active and passive funds, preferring passive funds for the larger company exposure.
One of these is the L&G UK 100 Index Trust, which holds a Neutral Rating from Morningstar analysts.
Morningstar analyst Hortense Bioy says: “This is a good choice for investors seeking pure exposure to UK giant- and large-cap equities, but its lack of breadth means it will likely lag category peers over the long term.”
She points out that this index is concentrated in giant caps and can leave investors underexposed to other segments of the UK market.
Webster also invest in Man GLG UK Income, which invests in a number of mid-cap stocks as well as the larger pharmaceutical, tobacco and oil giants that typically pay decent yields.
This fund has a Bronze Rating from Morningstar analysts. Analyst Samuel Meakin describes this a “highly disciplined, value-focused” fund, that is focused on the UK equity income sector.
Fund manager Henry Dixon has been in charge of the fund since 2013. He adopts the same investment approach he employs on the Man GLG Undervalued Assets, by trying to identify companies where the profit stream is being undervalued relative to the cost of capital. Clearly as an income fund there is also a focus on stocks that deliver a yield at least equivalent to that of the market average.
Mid Cap Stocks for Growth
Webster also holds the iShares Mid Cap UK Equity Index Fund. As the name suggests this tracks the FTSE 250 index, excluding investment trusts. It has produced annualised returns of 10.67% over the past five years.
Webster says he balances this with a number of global funds, which are focused on the larger tech multinationals, such as Amazon and Google.
He says: “I know these are typically considered as growth stocks, and people of my age tend to de-risk their portfolios and concentrate on income stocks instead. But I’m trying to balance the two. I certainly don’t want to be investing at bonds at the moment, so I’m hoping a mix of property and equities works for me.”
We are looking to talk to investors about how they build their portfolios, and what their best and worst investments have been.
If you are interested please contact us on: ukeditorial@morningstar.com
