Steve O’Toole, 58, sold entirely out of his equity holdings when the Covid crisis initially hit: “When Italy went into lockdown, I moved all my Sipp and Isa holdings into cash.”
Steve, who works as a training consultant in the engineering sector, has only been investing for two years, and found the potential health and economic ramifications of the pandemic alarming. He had initially used a financial adviser but later found out he could choose his own funds through an investment platform and preferred this route.
He says: “I looked at a lot of funds to identify the best performers over a five-year period. My target is to invest in funds which have good long-term performance and the potential for growth and I’ve tried to ignore the hype around star fund managers – you only have to look at what happened to the Woodford fund.”
Going for Growth
When picking funds for future growth, Steve says fees have not been a key consideration for him. “I would rather a 2% fee on £100 profit than pay 0.25% for a £50 profit,” he says.
Still, one of his main holdings is the Silver-rated Scottish Mortgage investment trust (SMT), which has a particularly low fee for an actively managed fund. Run by James Anderson, the trust focuses on identifying high-growth companies and holding them for the long-term to gain the benefit of compounded growth. These companies will often have been new entrants or disruptors into a region or industry. However, the high-growth leveraged portfolio is likely to be volatile, which should be borne in mind by potential investors.
Steve, who lives in Kent, says this growth objective was what he was looking for prior to Covid-19, although he points out that there not all fund platforms offer access to investment trusts like this.
He says: “There were not many providers offering this trust, but I was able to purchase it through the Sipp I hold with AJ Bell. Halifax also offers access (through its Share dealing service) but the trading fee on the Halifax is account is £12.50 compared to just £1.50 with AJ Bell.”
Most of the funds he currently invests in have a global outlook, and he is looking to gain exposure to the US and China, as well as the technology sector. “It seems to me that the FTSE 100 doesn’t have any significant tech stock presence at the moment, but this is where future growth looks set to be,” says Steve
My Daughter's Fund Plunged
As well as rejigging his own Sipp, Steve has also made changes to his daughters’ investments, which are in a Child Trust Fund – a type of children’s savings account which was later replaced by Junior Isas.
“My youngest daughter had a child trust fund with One Family [previously known as Family Assurance Friendly Society]. It was not a great performer, but when the Covid crisis hit the fund lost as much as many so-called high risk funds, with its value dipping by about 40%,” says Steve. When he spotted the performance during last year’s market turmoil, he tried to switch the fund into cash but was not able to do this through the provider. “I had to watch the fund slowly bleed to death,” says Steve.
Since then, he has transferred the CTF into a Junior Isa, which he has invested in three funds. He invests monthly into the Jisa, so fees have been more a consideration in choosing a home for this money.
Switching his own investments, meanwhile, means Steve missed most of the stock market fall that came when the UK went into lockdown last March. “By changing my portfolio I like to think I am not better prepared for another disaster on such a scale, though hopefully it’s not likely in the immediate future,” he says. “Sadly, I wasn’t able to protect my daughter’s investments in the same way.”
Steve first looked at investing when he found himself with some spare cash that he wanted to put to better to use. And while he had initially planned to go into a business venture, he didn’t want to do this alone so decided the stock market would be a better option.
And while his main goal is to provide a comfortable retirement for himself, he also wants to be able to leave an inheritance to his daughters: “If I can get to my final day with my girls picking up the lot then I’ll die happy. But, who knows, if something disastrous happens this can be a useful rainy day fund too.”
