Dianne Sullivan started to look more seriously at investing three years ago with a view to gaining financial independence.
Now 49, she works for a global telecommunications company, has been paying into her company pension for around 15 years, but started to build her own separate portfolio of ISA investments around three years ago.
“I’d like to have the freedom to choose the work I do each day, regardless of how much or little it pays,” she says.
“I have a combination of an ISA, pension, premium bonds and cash, which I hold across a number of different platforms.”
Wide Berth
Sullivan has made a conscious decision to stay clear of the buy-to-let market. While property may have proved to be a very lucrative investment for older baby-boomers, the opportunities do not look as attractive now. Property prices have risen significantly in recent years, but she adds there has also been a huge increase in costs too – not least in the way buy-to-let properties are taxed.
“It seems to me many people underestimate the costs. Mortgages costs are more expensive than residential mortgages, and then there are letting costs, maintenance costs, legal fees and tax costs on top,” she says.
“Investing in the stock market is now far easier and more accessible so I have decided to focus on this instead. The opportunities look much more attractive.”
Instead, she has focused her investment strategy on exchange-traded funds (ETFs) and ready-made portfolios, which offer the benefits of diversification and low fees. One of her main holdings is the 100% equity version of Vanguard’s LifeStrategy fund, which she holds via’s Vanguard’s own platform.
This can be a highly cost-effective way to access Vanguard’s range of LifeStrategy funds, which offer different risk-rated equity quotients. However, the platform only offers access to Vanguard’s own funds.
LifeStrategy funds invest in a portfolio of passive investment products. This fund’s top holdings include the UK all share index unit trust, an S&P 500 ETF and an emerging market index. It has a silver quant rating from Morningstar, reflecting its robust process and competitive charging structure. It also has a three star rating, and while it remains a strong performer in the global large-cap equity category, it has lagged its benchmark in recent years.
That said, investors have still enjoyed decent returns in recent years. According to Morningstar data it has delivered annualised returns of 12.14% over three years and 11.29% over a 10-year period.
Twice Shy
Alongside this portfolio, Sullivan also has an ISA with Nutmeg, which also offers a range of risk-rated ready-made portfolios for private investors. Many of these are multi-asset portfolios, and predominantly invest in ETF and passive holdings to keep fees down.
“Initially, I tried investing in individual shares, but found this to be too risky and far less reliable, particularly when compared to ETF holdings,” she says.
One of her first forays into stock market investing was to buy shares in the electric car manufacturer Tesla (TSLA).
“Unfortunately, I bought when these shares were at their peak, and lost a bit of money as a result. The experience has put me off individual share investing," she says.
Run by billionaire rocket and flamethrower enthusiast Elon Musk, Tesla has seen its share price rise at an extraordinary rate since the start of 2020. At the start of that year, prior to the Covid-19 pandemic, Tesla shares were trading at around $95. By the start of 2021 they were priced at $880, before rising to a high of $1222 at the start of November 2021.
Since then the shares have been on a bumpy downwards trajectory, closing at $877.85 last week.
Morningstar gives Tesla a two-star rating, noting the Nasdaq-listed company’s share price is still above analysts’ "fair value" estimate of $700. Morningstar also points out the company has a narrow economic moat, meaning that, while the company has a decent enough competitive advantage for now, there are clear threats to its market position, notably in the form of Volkswagen and other US electric vehicle companies like Rivien. Our analysts also say there is “very high” uncertainty about its future performance.
Strategically, Tesla has ambitious growth plans, and aims to move into the more affordable “midsize” market. Recent results show it has enjoyed 60% year-on-year growth. However, despite this Morningstar analysts say: “Our long-term outlook is largely unchanged as we continue to expect Tesla's sales growth will slow.” That’s one of the reasons the company could be out-sold by Volkswagen.
For her part, Sullivan has stopped trying to buy stocks with the potential to beat the market.
“I have learned I would rather invest on a regular basis to take advantage of pound cost averaging, regardless of how the market is performing,” she says.
