Like many savers in their 20s, Joshua Barber’s prime savings goal is a deposit to help him onto the property ladder. But Joshua also has an eye on longer-term goals and is also saving for retirement.
Aged just 26, he has already been investing for almost 10 years, but has taken the task more seriously since he left university and began working full-time. “I studied finance at university, which taught me quite a lot about the importance of long-term savings and the benefits of starting early,” says Joshua, who now works for a bank.
Saving for a First Home
He splits his money between cash Isas for short-term savings and a stocks and shares Isa for longer-term savings. He also has a Lifetime Isa, which he is using to invest money to grow a deposit to buy his first home. He and his girlfriend, who live together in Chingford, north east London, are hoping to be able to buy within the next few years.
This Lifetime Isa benefits from a 25% government-paid bonus on contributions up to a maximum of £4,000 a year. Money from these accounts can be used to help investors get on the housing ladder or, if not used for this purpose, for retirement. As well as this, Joshua also invests in his company’s pension scheme and participates in their workplace share incentive scheme.
When it comes to selecting his investments, Joshua looks at a range of factors but tends to favour tracker funds with low fees as he believes they provide good value. As he is still young he is also happy to take on more risk in the hope of achieving greater returns, too, and has recently started to incorporate funds with a focus on impact investing into the mix. “I like funds where the underlying investments try to deliver positive social and environmental benefits, as well as positive returns,” he explains.
With cost a key consideration, Joshua holds a number of Vanguard funds and his two main holdings are the Vanguard FTSE UK All Share Index and the Vanguard US Equity Index funds, both of which have a coveted Gold Morningstar Analyst Rating, as well as four-star performance rating.
Morningstar analyst Briegel Leitao says: “The Vanguard US Equity Index is expected to continue to outperform its Morningstar category peers over the long-term. A passive investment approach is becoming the standard for investors looking to gain exposure to US equities.”
The US fund has been a successful investment for Joshua so far although, like most of his portfolio, it has been affected by the recent sell-off triggered by the Covid-19 pandemic. “I don’t want to sell out now and miss the potential bounceback that will eventually come,” points out Joshua. “I have a long-term investment horizon so I’m not worried about this volatility in the market at present.”
Sustainable Fund Options
Alongside these trackers, Joshua also holds a number of active funds including JPMorgan Emerging Markets Trust (JMG), Pictet Clean Energy and Pictet Global Environmental Opportunities.
This JPMorgan fund has been another good performer for him, at least until the recent market fall out. The trust has a Silver Morningstar Analyst Rating and the maximum five-star rating, reflecting its strong outperformance in recent years. Run by Austin Forey since 1994, Morningstar analysts say it is a “compelling option” and rate the manager, his investment process and well-resourced team. While Joshua acknowledges that emerging markets are typically a higher risk investment, he thinks the growing economies of countries across India, Central and South America will provide growth in the years ahead.
The two Pictet funds are examples of those with a clear remit to take environmental, social and governance (ESG) factors into account, alongside more traditional financial metrics. Joshua says: “I often choose investments on a monthly basis and just a couple of weeks before the current sell-off, I invested in one funds which has been significantly impacted. Although I am sticking with it for now it is a lesson in how unpredictable the market can be.”
