Like many workers, Rob Shearing reached his 50s with a hotchpotch of different pension pots.
With retirement looking closer, he decided it was time to take the reins and try to consolidate these various plans, which included both workplace and private pensions. “I wanted to take control of my money and manage these savings more actively with a view towards future retirement.”
To do this, he set up a self-invested personal pension (Sipp) with AJ Bell, choosing the firm because trading fees were low and he could manage his account online. He adds: “Since opening the Sipp, I’ve also taken out a stocks and shares Isa, and my wife has also opened a Sipp.”
As the chief executive of a credit union, a background in financial services has given Rob the confidence to manage his own retirement savings, although he admits his day-to-day professional experience is a “a world away from stock market investments”.
Stick to What you Know
He has tried to build a diversified portfolio, which is primarily invested in individual shareholdings, rather than funds: “When I started investing I mainly bought funds, but as my confidence has grown I’ve invested directly in individual companies.” In most cases these have delivered decent returns, although share prices have obviously taken a hit this year.
Rob, who lives in Retford in the East Midlands, focuses on shares that pay a decent dividend and have a track record of good growth and long-term stability. This tends to lead him to FTSE 100 and FTSE 250 stocks and current holdings include insurance giant Aviva (Av.) and WM Morrison supermarket (WMR).
He says: “These seem like solid stocks, that are a good bellwether for the economy. Their shares have retreated from previous highs, but I think they are quality companies, run by a good board and with a good track record on dividends.”
While Rob is wary that many firms will reduce or scrap their dividend payments this year, he expects these companies to be profitable over the longer-term so is hopeful their payments will continue in the future.
Aviva has a five-star rating from Morningstar, reflecting the fact that the current share price is below the fair value estimate. Returns over the longer term have been steady, with investors receiving annualised returns of 4.88% over the past 10 years. However, over the shorter term the stock has not performed so well: according to Morningstar data, investors have seen total annualised losses of 11.49% over three years (compared to annualised losses of just 0.68% from the FTSE 100).
Morrison, meanwhile, has a three-star rating from Morningstar, highlighting that it is trading at or around its fair value. Investors in this stock have seen annualised returns of 5.8% over five years, more than they would have received from the FTSE 100.
Morningstar equity analyst Ioannis Pontikis says: “Although operating margins in the grocery industry are similar among the Big Four supermarkets, we reckon Morrisons has a more efficient operating cost structure than Tesco and Sainsbury’s.” He also likes the stock because it has a stronger balance sheet than its peers, with no pension deficit and owns a higher proportion of its stores.
Rob tends to avoid certain sectors, such as technology and pharmaceuticals, because he is less knowledgeable on these industries , where things can change quickly.
Instead, he prefers stocks in financial services where he has more experience. Current holdings include Equals Group (EQLS), which runs the foreign exchange payment processing company FairFX in the UK.
He says: “Initially I was a customer and thought the service and products offered were very good. I did a bit of research about the company and it seemed an interesting opportunity so I added it to my portfolio.”
When buying shares, Rob says he tends to drip feed money in over a period of 12 to 18 months to help smooth out volatile share prices. “To me, this helps mitigate some of the risks,” he explains. “I don’t want to pile all my money in on day one, and regret it on day two.”
The Holiday That Inspired my Investments
While he primarily invests in shares direct, Rob does have a holding in VinaCapital Vietnam Opportunity Fund (VOF), an investment trust that invests primarily in Vietnam. With a focus on a single emerging market country, this is a higher risk investment, but Rob is comfortable with this as it makes up only a small part of his overall portfolio.
He was inspired to invest in the trust after a holiday to Vietnam: “When we got back I started researching potential investments and this one really appealed.” He particularly likes the way that the trust is set up, with the board of directors each having stakes in the trust, as well as the fact that it pays a decent dividend. Growth has been “steady and consistent” since he invested and Morningstar data shows it has delivered annualised returns of 17.21% over five years, and 7.67% over three years.
Rob adds: “I like the way the trust communicates with its investors. The managers seem to do a lot of research and invest in start-up companies in the region, which they then look to sell-on.”
