Graham Francis started to look at investments more seriously five years ago, after taking the tax-free 25% lump sum from his pension pots.
Graham, who lives with his wife in Worcestershire says: “I was fortunate enough to have a final salary pension scheme from my work as a marketing manager in the software industry. This covers our baseline home costs and I also now have three other retirement funds, including two Sipps which I actively manage."
Graham’s main reason for investing is to increase the value of these Sipps and provide the couple with long-term funds for retirement. He also has a stocks and share Isa, to fund holidays as well as his classic car and motorcycle hobby. “It’s a rainy day fund should we need it,” he says.
Graham, who is in his early 60s, accessed his pension five years ago as he wanted to take advantage of the 25% tax-free lump sum, which you can take from your pension pot when you reach age 55. As a higher-rate taxpayer he felt it would be prudent to max out the amount he was saving into his pension, rather than take all of his salary, and would use the tax-free lump sum to make up the difference.
Since then, he’s become more interested in investing and holds funds focusing on the US and global growth. He says: “Typically, I am looking at medium- to higher-risk funds, mostly with exposure to technology and healthcare.”
He chooses his funds by considering their growth potential, rather than focusing on fees or dividends paid, and tries to take advantage of free research available through his Sipp provider, AJ Bell, as well as sites like Morningstar. Graham says: “I attend webinars, study publications and discuss ideas with my son, whose investments have achieved outstanding growth over the past few years.”
Investment Trusts for my Pension Pot
Within his pension portfolio Graham holds a number of investment trusts, and recent purchases include Scottish Mortgage (SMT) and Monks Investment Trust (MNKS), both of which are Silver-rated by Morningstar. Graham has also invested Worldwide Healthcare (WWH) which has a four-star rating.
Scottish Mortgage was one of the trusts recommended by his son and Graham is pleased he followed this tip: “In the six months I’ve been invested the performance has been outstanding.”
The trust has a five star rating from Morningstar and was the top-performing rated investment trust of 2020. According to Morningstar data, it has delivered total returns of 104.97% over the past year — comfortably outperforming its benchmark which delivered a just 10.34% return over the same period.
Morningstar analyst Robert Starkey says: “Scottish Mortgage Trust continues to deliver on its unique mandate.” He points out that the trust follows a “high-growth, leveraged” approach, which means returns can be volatile but the managers ability to find the new entrants or disrupters in regions or industries that have long-term growth potential has delivered excellent returns for shareholders.
The trust is managed by James Anderson and Tom Slater of Baillie Gifford, and also invests in a number of other Baillie Gifford funds, including the Baillie Gifford Global Discovery fund, which has also been a stalwart performer in his portfolio. This fund has a Bronze Rating from Morningstar as well as a five star rating. Morningstar data shows it has delivered total annualised returns of 31.11% over five years.
Why I'm Investing in China
As well as focusing on technology and healthcare funds, Graham has also increased his exposure to China as another growth option. He says: “Despite potential political risks, China looks to be a great opportunity for growth over the next few years. The growth in the Chinese middle class will drive demand for better healthcare and greater technology adoption.”
Graham has four children from his first marriage, and his wife has two children from her previous marriage. As well as these fund investments, Graham and his wife have some Premium Bonds, which they hope to use to fund an extension on their home in the future.
And while Graham has been happy with his investments so far, not all have moved in a positive direction over the past couple of years. He says: “I invested a significant sum in a couple of UK large cap funds about 18 months ago, thinking they had reached the bottom, but they then continued to fall, losing about a further 25% in value."
Graham decided to hang on to the funds though, with the hope of a recovery through avoiding a no-deal Brexit. He adds: "Fortunately that happened and both are now roughly back to the value they were when I made the investments.”
Although Graham has now retired from full-time work, he still does occasional freelance projects involving research and writing on market trends in the technology sector. He is also a trustee for a local charity helping those struggling with poverty in rural Herefordshire.
