At the age of 62, you might assume that Phil Webb is looking to reduce the risk in his investment portfolio – instead he is backing start-up companies in a bid to boost his pension pot.
While Phil, who lives in Manchester with his wife, is planning to reduce his working hours gradually over the next decade but doesn’t expect to retire completely any time soon. This is partly because he still enjoy his work in market research but also because, while his finances are “healthy”, he would like to boost his pension savings further before he stops work.
Property investments, he hopes, will provide a reliable stream of income. “We never sold our first home but rented it out as a buy-to-let for years,” says Phil. The couple then bought a second flat with an inheritance, which they also rent, and the mortgage on their main home is now paid off in full.
“It is good to know that these properties have all steadily increased in value over the years and we can always sell them and invest the money if they don’t generate an income,” he adds. “Bricks and mortar seem a safe long-time investment and it feels like the foundation to our finances.”
Why I Like the Tech Sector
As well as these properties, Phil invests in stocks and investment trusts through his self-invested personal pension (Sipp). He tends to avoid open-ended funds where is wary of the cult of the star fund manager and of high fees. “Over the past few decades, there have been several big names that have been lauded but they rarely seem to outperform over the long-term,” he says.
In his direct shareholdings, Phil tends to focus on growth sectors such as technology, though he aware of the risk of investing in today’s “star buys”. He says: “You can see the risk by looking at the performance of companies like Yahoo! And MySpace in the past. I’ve tended to steer clear of companies like Tencent and Facebook because of that.”
However, he does hold Google-owner Alphabet (GOOGL) as well as Apple (AAPL). Phil adds: “I think Alphabet is particular interesting because of the range of its interests, from electric vehicles to health areas, to Deepmind.”
Morningstar analysts point out that Alphabet dominates the online search market, with Google’s global share above 80%, from which it generates strong revenue growth and cash flow. Analysts expect the firm’s cash flow to continue growing and are confident it will maintain its leading position in online search. They also expect YouTube to contribute more to its revenues in the future, adding: “We view investments of some of that cash in ‘mooshots’ [higher risk start-up initiatives] as attractive. Whether they will generate positive returns remains to be seen, but they do present significant upside.”
As well as individual shares, Phil is tapping into the tech sector through investment trusts, including the Silver-Rated Scottish Mortgage (SMT), a global trust with a track record of investing in disruptors across many industries. Phil says it has been a “solid performer” within its portfolio.
According to figures from Morningstar, this trust has delivered total annualised returns of 32.8% over five years (based on share price), and 24.04% over 10 years, comfortably outperforming its benchmark.
Investing in Start-Ups
Elsewhere, Phil picks companies he is familiar with and whose services he has used such as AJ Bell (AJB), an investment platform through which he holds an Isa. Phil backed the company at its IPO in 2018 and it has seen strong growth since. While shares fell in the Covid-19 market turmoil earlier this year, they are now close to their previous high.
And Phil has also backed some companies not yet listed on the stock market through a crowdfunded Enterprise Investment Scheme (EIS) structure, including WeSwap, a peer-to-peer currency exchange business.
Crowdfunding can be a risky way to invest and Phil has not always had success. He previously backed Sugru, a company that made an mouldable adhesive dubbed “the British blu-tac”. The business raised money via the Crowdcube website and the product looked promising; Phil was hopefully that investing at an early stage could prove profitable but his hopes were dashed when the company sold to a large German manufacturer for “what many investors thought was a knockdown price”.
Phil says: “I only got back around 10% of what I put in. I was an early user of the product so thought it made sense to invest too but this shows the risk of investing in smaller start-ups.”
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