Will Raunds may be only 31 but he has already been investing for almost 10 years.
Will, who works in sales and business development, started his first investment Isa when he was in his early 20s. “I tried to make sure I was putting away £400 or £500 a month, rather than simply spending this money on going out or holidays. At the time saving was certainly my priority,” he says.
Starting the savings habit at an early age has certainly paid off. When Will got married a couple of months ago, he was able to use some of the profits from his investments to help pay for the honeymoon.
He says: “We’re now saving for a deposit to buy our first home, so it’s good to know that I have these investments that can help towards that too.”
Will, who currently lives in south west London, has tended to stick with Isas, rather than a pension, as these give him the ability to tap into his money when he needs to. He does, however, also save into a pension through his work, although he admits that he hasn’t really focused on where this money is invested.
When it comes to his Isa, Will invests in a diverse range of funds. He says: “I have tended to focus on boutique or specialist fund managers. I research them quite thoroughly. My Isa is with Chelsea Financial Services, and they provide a lot of information, which has proved helpful.”
The platform’s fund rating system and its Top 50 list have proved particularly useful: “There are several thousand funds so this is a good way to narrow the potential pool down to about 70-odd funds.”
Overweight in Smaller Companies
Will has tried to split his money across different categories including European larger companies, global equity, absolute returns funds and sustainable funds. But he has tended to be overweight in smaller companies, which can sometimes be more volatile and are higher risk. "But at my age I can afford to take this kind of risk," he says.
Over the past few years, these funds have done particularly well. His holdings include Liontrust UK Smaller Companies and River & Mercantile UK Equity Smaller Companies fund.
This Liontrust fund has a five-star rating from Morningstar reflecting its strong performance relative to peers. It also has a Bronze rating. Morningstar analyst Sam Meakin says: “We believe this fund to be an attractive offering for investors seeking UK small-cap equity exposure.” Anthony Cross, leads the fund management team and has run this fund since 1998. Meakin says the team is experienced with a good process in place.
However, Meakin does point out that the size of the companies within the portfolio tends to smaller than many smaller company funds, which means its performance can diverge significantly from its peers.
Elsewhere, Will also has a holding in Schroder Recovery. This fund, run by Nick Kirrage and Kevin Murphy, has a Silver rating, and a three star rating. According to Morningstar the manager duo has demonstrated “a strong working relationship and shared a sound investment philosophy since taking over the management of this fund in July 2006.”
However Will is concerned their value-style of investing has been out of favour in recent years. “It hasn’t been one of the better performing funds in my portfolio but I am sticking with it for now,” he says.
Transparent Mandate
Elsewhere, he has been keen to add some sustainable options into his portfolio and has recently invested in BMO’s Sustainable Opportunities Global Equity Fund. He says: “There seems to be a lot more interest in and focus on sustainability. This looks like an exciting area to invest in.”
However, while there are now a number of funds that are badged as “sustainable” or claim to take environment, social and governance (ESG) factors into account, Wil has found it quite difficult to get information on what exactly the fund managers were doing on these issues.
"I invested in the BMO Sustainable Opportunities Global fund because it seemed to be a lot more transparent, and it was clear what it was trying to do, and what was going on within the fund," he adds.
Will has continued to drip feed money into his Isa on a regular basis, but will also add lump sums a couple of times a year. He says: “I try to keep a spreadsheet of how these different funds are performing, and if something is doing well I may add an extra sum.”
He also uses this spreadsheet to monitor underlying holdings so there is not a significant cross over and he can ensure the portfolio as a whole is well diversified. In the past, for example, he has switched holdings between Fundsmith Equity and Lindsell Train Global Equity Fund - both of which have coveted five-star ratings from Morningstar. The Fundsmith fund has a Gold rating, while this particular Linsdell Train fund has a Silver rating.
Both of these managers take very concentrated positions and are prepared to take significant positions away from the index. They are both also global large cap funds.
Will says: “I have had fantastic returns from each, but have chosen not to hold them both at the same time, as they both take a similar approach to trying to find good quality stocks and holding them for the long-term.”
