Nick Harper has run his own education consultancy business with his wife since 2001 and, like lots of small business owners, is investing to ensure financial security in future.
He says: “My goals are to pay off the mortgage, build up a retirement income, and ensure we have some general savings.” He also wants to be sure there’s a financial safety net if his business revenues dip.
Nick has been an investor since 2011, having been inspired by his father who had a “very solid strategy” but who also dabbles in trading on individual shares “when he gets a bit bored”.
As well as managing his own money, Nick looks after his wife’s pension and Isas, and the savings for his children. He says: “My daughter is 25 and is hoping to pay off her student loan and save for a house deposit. However, her boyfriend is a pretty nifty investor and she is a masters’ level mathematician so I may need to cede control soon.”
His adds: “My son is at university and has been trying to get me involved with the Reddit ‘market occupy’ phenomenon.”
This trend saw shares in the US games retailer GameStop (GME) soar up to 300% over the past week, after day-traders started buying the struggling stock, causing significant financial problems for many hedge funds.
Nick chose not to invest, which looks a wise move given shares have subsequently slumped. He says: “I haven’t got involved as I think it’s a wider issue than ‘big equals bad, and small equals good’. But many folks don’t seem to think beyond the immediate battle.”
I Choose Low-Cost ETFs
When it comes to his own investments, Nick tends to stick to low-cost ETF trackers, rather than buy actively managed funds as he is unconvinced that many fund managers add value of the long-term. He is concerned about the impact of higher fees and other hidden costs on investor returns.
Nick splits his money between his pension and his Isa, and maintains both as he doesn’t have a fixed retirement date in mind. Alongside his core ETF holdings, he also invests in some individual shares and one that has performed particularly well for him is electric car manufacturer, Tesla (TSLA).
“Years ago ,my wife said she would love a Tesla, but thought we’d never be able to afford one,” says Nick, who decided to buy a few shares for his wife instead. “Imagine her surprise when I revealed that those shares could today buy a top-end customised sports car. The only problem is that this is our pension, so I am sticking with the 12-year old Mondeo.”
Nasdaq-listed Tesla has rocketed over the past year, with shares rising from $95 at the start of 2020 to a peak of $880 towards the end of the year. Morningstar analysts say Elon Musk’s company has a chance to be the dominant electric vehicle firm long term. Analysts add: “[Tesla] is a leading autonomous vehicle player as well as a vertically integrated sustainable energy company with energy generation and storage products, but we do not see it having mass-market volume this decade.”
But with only a narrow moat rating, analysts say shares are now trading significantly above their fair value estimate of $306.
I Should Have Bought More
Elsewhere, Nick has also seen strong returns from his investment in Games Workshop Group (GAW) — the company that sells model kits for wargames – but has regrets about not buying more of its shares: “I bought less than £1,000 of GAW shares with a carefully crafted strategy in my early days of investing. If only I’d committed more!”
According to Morningstar data, investors has seen total annualised returns in this company of 82.93% over the past five years, and 40% over the past decade. This far outstrips returns from the FTSE 100, which has delivered annualised returns of just 4.73% over 10 years.
Nick says: “It’s interesting asking the people in the GAW stores why they think their company is doing so well – they give you even more confidence. That’s something I learned from my father about high street investing: go in the store and talk to the employees. Do they refer to management as ‘they’ or ‘we’? It’s a big hint about company ethos.”
Not all of his investments have delivered such good returns, however. One of his worst buys has been the investment trust ScotGems (SGEM), which invests in emerging market smaller companies.
He says: “I bought this following tips from friends and family without any real analysis. I am not sure what the shares are doing now, I can’t bear to look!”
According to Morningstar data, investors in the trust have seen total annualised losses of 7.89% over the past three years (This is based on share price, rather than NAV). However, there has been a very modest turnaround in share price in the last three months.
Nick says: “Overall I’ve not changed my long-term strategy and have learned that sitting and holding works. Even when you watch your money draining off the screen. It always comes back – often in surprising ways.”
