As a chartered accountant, it is not surprising that Leonie Richards tries to ensure she saves as tax-efficiently as possible.
Richards, who is 47 and lives in West London, has had an Isa with Selftrade for a number of years, through which she invests in a number of direct shareholdings. More recently, since leaving full-time work to have children, she has also taken out a Sipp with the firm.
Richards has always preferred investing directly in companies, rather than buying shares. She says: “I have never been as keen to invest in funds because can be higher. Also, I want to make the decision as to where my money is invested, not hand that over to a fund manager. I like the fact that I’m in control.”
Richards says initially she was “quite adventurous” with her Isa, investing in a number of smaller higher-risk companies, including some listed on the Alternative Investment Market (Aim).
She traded these stocks relatively frequently in an effort to maximise returns. “I have been happy with the returns on this Isa. It certainly seemed to be delivering more than my company pension at the time,” she adds.
However, since going freelance, Richards has taken a slightly more cautious approach. This is, in part, because she also doesn’t have as much time to monitor performance and make appropriate changes.
She explains: “I still invest in some companies that might be seen as higher risk, such as oil and gas mining companies, but I’ve tried to balance this with some larger FTSE holdings, which will hopefully prove to be good long-term dividend payers.”
Currently on the riskier end of the scale, Richards has holdings in Sirius Minerals (SXX) and Centamin (CEY) in her ISA. On the safe and steady side, are Lloyds (LLOY) and Vodafone (VOD).
Sirius Minerals is a UK-based company that produces multi-nutrient fertiliser. This is a small growth stock; the business currently employs 156 people. For shareholders, returns have been mixed: those who have held the share for 10 years have seen total annualised returns of 24.05%, according to Morningstar data.
More recently, however, this growth has slowed. Over a five-year period, shareholders have seen total annualised returns of 8.47%, while over a one-year time frame, the company has delivered a total loss to shareholders of 47.62%.
Centamin is involved in the exploration, mining, and development of precious metals in a number of countries, including Egypt, Burkina Faso and Australia. Returns have been similarly volatile for shareholders. According to Morningstar data shareholders have received total annualised returns of 13% over the past five years. The three-year picture is less rosy, with total annualised losses of 0.67%, while over the past year shareholders have endured a total loss of 44%.
Lloyds Banking Group has a four-star rating from Morningstar, reflecting the fact that the company shares are currently trading well below its “fair value” estimate of 76p. The bank’s dividend yield is currently 5.13%.
Morningstar equity analysts say that while the bank could be affected in the short-term by the UK’s decision to leave to European Union, they believe the bank “can weather any short-term volatility”.
Analysts add: “In our base scenario, factoring in some slowdown in GDP growth, we believe Lloyds will continue to increase its return on equity during our forecast period.”
Vodafone, meanwhile, has a five-star rating from Morningstar. The telecommunications giant currently has a meaty dividend yield of 9.38%.
Morningstar analysts say: “Vodafone is successfully transitioning from one of the world’s largest wireless-only telecom firms to a diversified operator offering converged mobile and fixed-line services in many markets. We think this is an important transition, as Europe is rapidly moving into a converged world.”
The company is currently trading at around 131p per share, which is significantly below the Morningstar analysts’ “fair estimate” of 250p. They add that the company has a narrow moat, meaning its markets have some protection against rivals.
Although Richards is prepared to take some risk with her Isa, she has quite a different investment strategy when it comes to her Sipp.
She explains: “My Sipp is obviously a longer-term savings plan, but it is a core part of my savings and investments. Since going freelance I don’t have a company pension any more so I am hoping this will help fund my retirement, so I don’t want to take too much risk with this money.”
To this end, her Sipp is mainly invested in larger blue-chip companies with a solid track record of paying decent dividends. This also includes Lloyds and Vodafone, as well as BT (BT.A) and food services company Compass Group (CPG).
Richards says she aims to have a “buy and hold” approach with her Sipp and is looking to add good quality stocks to it over time that she can also hold for the longer term. “There are costs to buying and selling stocks, and it is difficult to get the timing right,” she adds.
Richards says she tries to research stocks thoroughly before buying, to check a company’s dividend record, its cash balance and how its share price has moved over the longer term. She says: “I’ll look at the financial section of newspapers for tips, as well as online sites, like Selftrade.”
