Iain McEwan is planning to retire within the next couple of years and is hoping his investment portfolio will enable him to enjoy a good standard of living.
Iain, who works in the engineering industry, has been an investor for 20 years, and owns a range of funds and direct shareholdings.
“As well as managing my own Isa, I also manage a portfolio for my wife, who retired from her teaching job last year. Fortunately she has a good pension from this profession.
“I have a smaller final salary pension from a previous employer, but am hoping that these Isas, plus some private pensions I contribute too, will ensure we are financially secure.”
The couple, who live near Glasgow, are not planning anything “extravagant” for retirement, but hope to travel and visit family and friends.
“Our son lives in Madrid so we are hoping to visit a bit more regularly.”
Iain has always been a more adventurous investor. “I think it helps that we know we have our pensions to fall back on. But it seems that the riskier investments have always performed better over the longer term.”
Astra and Glaxo
Iain has had holdings in the pharmaceutical and technology sectors for a number of years. This includes a long-standing holdings in both AstraZeneca (AZN) and GlaxoSmithKline (GSK).
Shares in AstraZeneca have risen steadily in recent years, and over the past five years shareholders have seen annualised returns of 18.4% according to Morningstar data – comfortably outperforming the 6.62% delivered by the FTSE 100 over this period.
This pharmaceutical giant has a 3-star rating from Morningstar, which means that it is fairly valued. “AstraZeneca has built its leading presence in the pharma and biotech industry on patent-protected drugs and a developing pipeline that add up to a wide moat,” says analysts. “The replenishment of new drugs is offsetting past patent losses… and the company is well positioned for growth.”
Although Astra has produced its Covid-19 vaccine on a non-for profit basis, in conjunction with Oxford University, interest in pharmaceutical companies and the role they have played in tackling the coronavirus pandemic helped push share prices upwards last year. However Astra’s share price has slipped back from its peak in July 2020.
Iain says: “I’ve been a long-term AstraZeneca shareholder, so I was hoping that I would get their vaccine, but in the end I had the Pfizer one. Not that I am complaining, as I was just grateful to get the jab and the protection it brings.”
GlaxoSmithKline has a 4-star rating from Morningstar. Its share price has not delivered quite the same gains in recent years as AstraZeneca, although investors have still had positive long-term returns. Over the past 10 years, for example, investors have seen annualised returns of 5.07%.
Morningstar says: “As one of the largest pharmaceutical companies, GlaxoSmithKline has used its vast resources to create the next generation of healthcare treatments. The company's innovative new product lineup and expansive list of patent-protected drugs create a wide economic moat, in our opinion.”
Tech Trends and Trackers
Elsewhere, Iain says he has more recently invested in the Gold-rated Polar Capital Automation and Artificial Intelligence fund. As the name suggests, this global fund invests in companies that look set to benefit from the rapid development and adoption of AI and increased automation.
One of the fund’s lead managers is Ben Rogoff, a tech fund manager who has more than 20 years experience in this area. Morningstar says: “[The fund’s strategy] is weighted towards smaller market-cap companies, compared with the average fund in its peer group. But the strategy has maintained a defensive tilt, with consistent exposure to high quality stocks. This means that the fund holds companies that are consistently profitable, growing and have solid balance sheets. This should contribute to helping it weather downturns better that category peers.”
Iain has always looked to invest in new technologies, but this is balanced by core fund holdings that offer greater diversification. For example he invests in the Vanguard FTSE Global All Cap Index, which has a Morningtstar Quantitataive Rating of Gold and tracks this global index.
This tracker offers broad market exposure across the US, Europe, Asia and emerging markets. “It is one of those investments that I buy and leave. It seems good value as a core holding, and does what it says on the tin. It isn’t going to outperform the market, but gives me exposure to a broader spread of countries and companies than I would have otherwise.”
The fund has delivered annualised returns of 10.63% over the past three years, according to Morningstar data.
Not all of Iain’s investments have been successful. “Part of the difficulty is knowing when to sell, particularly when things are not going well.
“I was invested in a number of banks prior to the financial crash. I didn’t sell immediately and share prices in some cases did recover, but it took a long time. I eventually sold out of Lloyds for a small loss. I just thought my money would be better invested in other parts of the economy that were starting to power ahead again.”
