Phillip McMahon is looking to diversify his Isa investments with a view to maximising his retirement savings.
Phillip, 39, who works as an analyst in the financial services sector, has recently opened a Lifetime ISA and says he hopes this will give him flexibility when it comes to drawing an income later in life.
He says: “In future, once mortgage and other debts have been repaid I hope to be able to boost the amount I can save for my retirement.
“Hopefully this will allow me to maximise the annual Lisa allowance as well as making contributions into a regular stocks and shares Isa as well.”
Lisas are a relatively new savings product. They were primarily introduced to help younger savers save for a deposit towards their first home. However they can be opened by anyone under the age of 40 even if they are already on the housing ladder.
Investors can put in a maximum of £4,000 a year until their 50th birthday – and will get an annual government bonus equivalent to 25% of that year’s contributions. This is broadly equivalent to the basic rate tax relief available on a pension.
Money can be withdrawn to pay a deposit on a first property. Otherwise it has to stay invested until the holder’s 60th birthday when they can access these funds without penalty, and tax free. Money can be accessed earlier in an emergency, but there are penalties to pay, which effectively wipe out the value of these government top-ups.
Phillip, who lives in West Yorkshire with his wife, wanted to take the the opportunity to invest in a Lisa before his 40th birthday, and says this should help him further diversify alongside his existing savings products.
Phillip has been an investor now for around 15 to 20 years. “Over this period I’ve made sure I made the most of the pension contributions offered by the various employers I’ve had.”
Globally Diversified
When selecting an investment, costs are important to Phillip but these are not the main criteria when picking individual funds.
“In the main I like to use multi-asset funds which are globally diversified. This gives me access to markets across the globe and given the long-time horizon I have I can take more of an aggressive stance. For this reason all of my investment portfolio is 100% invested in equities.”
Phillip’s main fund is Vanguard LifeStrategy 100% Equity. This fund has a Silver Analyst Rating from Morningstar, and has delivered impressive annualised returns of 11.2% over the past 10 years.
Morningstar says that this particular fund has a cost advantage over many competitors and a proven effective process.
Alongside his global multi-asset investments, Phillip has also started to invest in some more specialist areas. This includes investments into funds that are more focused on the climate crisis and have a more positive impact on the environment.
To this end Phillip has invested in Impax Environmental Markets. This is another highly rated fund, with a Bronze Rating from Morningstar. The fund also has a 4-star rating, reflecting its strong performance relative to peers in recent years.
According to Morningstar, Impax Environmental Markets has delivered annualised returns of 11.61% over the past 10 years. Its shorter term track record is even more impressive, reflecting increased interest in ESG stocks in recent years and the relatively strong performance of of this sector in the wake of the Covid-19 pandemic. This fund has delivered annualised returns of 16.92% over the past three years.
Crypto Exposure
Phillip has also recently bought shares in Argo Blockchain (ARB), a cryptocurrency mining company as he wanted to get some exposure to this new asset class within his portfolio.
Since investing he has seen the value of his holding fall sharply. He says: “While I wouldn’t say this is a disaster I have seen the value of my holding fall by about 50% but I am staying invested for now. By selling I would simply be crystallising these losses.
“At the outset I appreciated this is a very volatile asset class and I expected these kind of movements having seen the huge fluctuations in the underlying cryptocurrencies that Argo mine. While I wanted some exposure to these assets within my portfolio I wasn’t wiling to expose more than 5% of my overall portfolio and viewed these kind of swings being within my capacity for loss.”
Morningstar figures show just how volatile the share price in this company has been. Over the past year, this stock has delivered a staggering 2,372.53% for investors, although as Phillip has found out share prices have fallen sharply since the highs recorded in February this year.
