Pensioner Larry Grieves is using his investments to fund his retirement, and is mindful of the impact of volatile markets on his drawdown plan. He says: “The challenge is to balance capital protection with growth.”
As well as investing to provide an income, Grieves would like to leave some assets as an inheritance to his two children and three grandchildren.
Sixty-nine-year-old Grieves lives in central London with his wife. The couple moved there when he retired seven years ago. Prior to this Grieves had been working abroad for a number of years.
He says: “During my working life we’ve always tried to put as much as possible into ISAs – although this wasn’t possible when we were overseas. I’ve also tried to maximise contributions to my SIPP.”
Grieves says that while he has built up a sizeable private pension pot, he still regrets the decision made more than 20-years ago to transfer out of his company pension scheme.
“Unfortunately I allowed myself to be persuaded by a financial adviser that it was better to switch. It was transferred 23 years ago after 20 years with the same company. It was a very generous scheme and I now greatly regret this decision,” he says.
Grieves manages his SIPP through AJ Bell, and has transferred some other workplace pension and savings accounts onto this platform.
A Portfolio of Top Performers
Grieves has focused on individual shareholdings and investment trusts, although he has more recently added ETFs to his portfolio.
He says: “I prefer investment trusts to funds as I find them more transparent and more liquid.”
Typically Grieves says he is investing for the medium to long-term, and has at least 20 holdings in his portfolio.
When choosing what trusts to buy he says he will look at past performance. “It’s always worth comparing how a manager has performed against others in the same sphere,” he says. “Costs are also definitely a factor. And we are trying to take more considerations of ethics.”
Grieves says that there have been four or five stand out holdings in recent years. These include F&C Investment Trust (FCIT), Finsbury Growth & Income Trust (FGT), JP Morgan American Trust (JAM) and Witan Investment Trust (WTAN).
The F&C Investment Trust – which has been running for 150 years – has a Silver Rating from Morningstar analysts, and a top five star performance rating.
Morningstar analyst David Holder says: “Investors remain in very safe hands with Foreign & Colonial Investment Trust.” He adds that the trusts global multi-manager approach has delivered for investors, while charges for this structure remain competitive.
The Finsbury Growth & Income Trust, managed by Nick Train has a coveted Gold Rating from Morningstar analysts, alongside a five star rating.
Morningstar analyst Peter Brunt says: “Finsbury Growth & Income is a standout choice for investors comfortable with a highly concentrated portfolio that can look markedly different from the FTSE All Share Index. It is run by an experienced manager who has shown a disciplined adherence to a well-structured approach since launch.”
The trust has delivered annualised returns of 18.04% a year for the 10 years.
Meanwhile, JP Morgan American Trust has a Neutral Rating from analysts. Holder says: “JP Morgan American offers core US exposure, supported by a strong analytical resource, but we feel the potential to outperform is wanting.”
The trust’s manager Garrett Fish has been in charge of the fund since 2002.
The investment landscape has shifted in recent years, says Holder, in that reliable and cheap exposure to the extensively tracked and traded S&P 500 is widely available for single-digit basis points. “The trust is competitive within its peer group but has failed to consistently add value within the core large-cap component of the portfolio,” he concludes.
Witan is another global large cap trust, that now operates on a multi-manager basis. It also has a silver rating from Morningstar, who describe it as a “solid choice” for investors.
Best Stock Picks are Income Winners
When it comes to individual shares, two Grieves’ better performing holdings are Unilever (ULVR) and Aviva (AV.).
Unilever is a British-Dutch conglomerate which manufactures and sells a range of household staples from Lynx deodorant, to Ben & Jerry’s and Magnum’s ice cream, Hellman’s mayonnaise and VO5 shampoo.
Morningstar equity analyst Philip Gorham reports that the company has a wide economic moat, meaning it has a large sustainable competitive advantage over its peers. The current share price is below analysts’ fair value estimate for the stock of £46.50.
Insurance company Aviva also is also trading at less than analysts’ fair value estimate for the shares of £5.75.
Morningstar equity analyst Henry Heathfield says: “Aviva is a mid-market insurer that has historically had its fair share of problems. It has been over-leveraged and caught with substandard processes and controls.”
But Heathfield points out: “The business is now on a stronger financial footing, and there is operational momentum in asset management and digital.” He adds: “Aviva has been largely managing captive insurance assets to the tune of around 80% of assets under management, but Aviva Investors is now better placed to attract accumulation and decumulation retail and institutional business.”
Grieves says that he has made decent returns from investing in these blue-chip companies over the longer term.
