Matt Dodd has been running his own recruitment business since the financial crash and recession of 2008, so this year wasn’t the first time he had seen the stock market plunge. But it was the first year he decided to start investing.
Matt, 44, took the plunge after his accountant suggested he should be putting spare money towards a pension. Matt liked the idea of learning more about investing and opened a self-invested personal pension (Sipp) and Isa through fund supermarket AJ Bell because he found the website and app easy to use and the research the firm provides useful - although he also looks at research from other websites such as Morningstar.
Currently, Matt makes employer contributions into his Sipp from his company and contributes to his Isa from his personal account. He says: “It has been a fun experience researching and selecting companies to invest in.”
But 2020 has been a challenging and turbulent year – for families, businesses and investors alike, and some might think this was not an ideal year to start investing. Matt says: “I accepted early on that while some of my investments might do well, others could fail.”
To date, however, he has been pleased with his investment decisions. He invests in AJ Bell’s own managed portfolio funds – a range of fund of funds which act as a one-stop shop investment, managed according to a certain risk level – and holds the VT AJ Bell Adventurous Fund and VT AJ Bell Balanced Fund in his Sipp, and invests in the VT AJ Bell Moderately Adventurous fund through his Isa. The Moderately Adventurous fund is up 17% since he invested, while the Adventurous and Moderate have gained 12% and 8% respectively.
Unloved Stocks Outperform
But Matt also holds a number of individual shares. Recent purchases have included cruise company Carnival (CCL), recruitment firm Hays PLC (HAS) and tobacco giant Imperial Brands (IMB). And surprisingly, it is these investments which have delivered the greatest gains – up 20% so far.
Carnival, which has a three star rating from Morningstar analysts, saw its shares plummet earlier this year as travel restrictions became widespread with the emergence of the coronavirus pandemic. The cruise industry was particularly hard hit, with many passengers stuck on docked ships for weeks. Its shares fell from a high of 3708p in January to just 620p in March. More recently shares have recovered slightly with the news of an effective Covid vaccine, reaching 1503p in December – but still less than half their peak.
Imperial Brands is rated five stars by Morningstar, indicating that it is trading significantly below its Fair Value Estimate. Morningstar analysts say the company has invested heavily in alternative “next generation” tobacco products, promoting the benefits of these and nurturing brand loyalty. The stock is also assigned a Wide Economic Moat, meaning it has competitive advantages protecting it from rival firms.
When it comes to selecting these shares, Matt gets his ideas come from online webinars and investment articles. “I’ve tried to use a bit of common sense as to what might be a good long-term bet,” he says. “And I have refused to entertain any ‘hot buys’ recommended by family or friends, as it is down to me to decide how I want the money to grow for the future.”
It Was a Very Good Year
While his first year of investing has gone well, Matt is expecting the ride to remain bumpy for some time yet. He plans to keep all of his holdings until April 2021 and then reassess them, looking for any “red flags” that might suggest its time to sell. He keeps a price in mind that he hopes to achieve for each of his holdings and plans to take profits when any reach that point and channel that money back into his Isa. “I feel comfortable with this approach as my risk is managed, and there is more diversification with the fund holdings,” he adds.
Elsewhere, he has cash savings in an account with Barclays and also holds Premium Bonds because these too can be accessed easily in an emergency. Other financial assets include his business and and a property.
Matt says: “I am not a massive risk-taker but I am going to stick with my Isa and Sipp, and may consider adding other funds next year. I also hope to pick some successful companies to invest in, researching industries works well for me as a personal investor and also as a business development opportunity for my recruitment company.”
