Get Rich Slowly: How I invest my money

In a former life, I put my whole financial acumen on the line to write a weekly column in a national newspaper detailing my investment portfolio. You may have read it. It wasn’t quite a labour of love; I was once compared to a less interesting version of Jim Cramer, the boisterous CNBC anchor who suggests stocks for his viewers to invest in.

At the time, I didn’t take it as a compliment, but perhaps I should. I certainly wish I had his apparently $5 million salary, and the renown to have two exchange traded funds with millions of assets invested in them named after me.

Anyway, the point is that we’re bringing the column back for you (un)lucky Kepler Trust Intelligence website readers. Every other weekend, my colleague Jo Groves and I will set out our portfolios, write our musings on the investment landscape and what, if anything, we might be interested in.

First, we should introduce our portfolios. I’ll go first this weekend, followed in a couple of weeks by Jo.

I have a stocks & shares Isa and a self-invested personal pension (SIPP), both with the investment platform AJ Bell, which I have variously written about. The two portfolios are quite different, but I’m working on making them more similar and plan on talking through my SIPP because that’s where I’m focusing most of my attention. As nice as it would be to have some cash in an Isa to allow me to retire early, I suspect that’s quite unlikely.

One of the first things that I’ve done since joining Kepler is nail my colours more to the active management mast. I’ve always been of the opinion that it’s possible to find good actively managed funds and that there are lots more out there than some would make you believe.

Perhaps it’s the gambler in me, but I like the challenge of finding those good active funds more than I like just mechanically investing my money in companies for no reason other than because they’re bigger than the rest, which is essentially what you’re doing if you own passive funds.

No doubt there are too many funds out there and lots are very bad; but the very good active funds more than make up for that – and I think I’ve got a strong list of funds managed by top-quality managers to pick from.

There’s a place for low-cost passive funds, because it’s a great way of boosting your wealth if you don’t have the time to research alternatives, but it’s certainly not the investing panacea.

Anyway, out went the Vanguard Global FTSE All-Cap Index and Vanguard Lifestrategy 100% Equity funds, which I’d made some decent profits (about 20% or so) on and in came some actively managed global equity funds.

Structure

I’d noticed that before I’d consolidated my old workplace pensions my stocks & shares Isa had become rather unwieldy, with 26 funds in it at one point. Diworsification, I believe they call it.

So, I wanted to have a better way to structure my portfolio. If I had 20-odd funds in my SIPP, at least I had reasons to hold them and knew what each was supposed to do.

In the event, I still have more than 20 funds, plus a dozen individual stocks, but they are split into different and distinct sleeves.

The core of my portfolio is in global equity funds, split between large-cap developed market, large-cap emerging market and small-cap. In total, it accounts for 50% of my portfolio with more in the small-cap funds than large-cap developed markets.

The reason behind this is that smaller companies have the potential to grow much faster than their large-cap counterparts. Smaller companies tend to be more volatile, but I’m happy to accept that volatility because I still have a good 30 years until I retire.

I also have it split between both investment trusts – such as Scottish Mortgage (SMT), Global Smaller Companies (GSCT) and Fidelity Emerging Markets (FEML) – and open-ended funds, such as Evenlode Global Equity, Schroder Recovery and De Lisle America.

I want to find the best possible managers and not rely on just one type of investment fund, though I should point out that I hold twice as many investment trusts as I do open-ended funds.

My more satellite holdings are split into a few different sleeves. Adding to my smaller company exposure Aberforth Smaller Companies (ASL) and BlackRock Smaller Companies (BRSC), which I hope are well placed to take advantage of a return to favour of UK smaller companies.

My two environmental holdings – Impax Environmental Markets (IEM) and Ninety One Global Environment fund – are also more small and mid-cap oriented and should do well as companies doing good for the environment become more in vogue with investors as the road to net zero continues. So should my selection of four infrastructure companies, where falling interest rates add a further potential tailwind.

Private equity investment trusts such as Patria Private Equity (PPET) and HarbourVest Global Private Equity (HVPE) seem sensible funds to hold at about 5% of my portfolio, too.

Then, there’s a bit of liquidity in the form of the Royal London Sterling Money Market and Vanguard Sterling Short Term Money Markets funds, which are there to provide some extra interest while I carry on drip-feeding the cash that I consolidated into my SIPP in the market over the next year or so.

Ups and downs

My individual stocks are more of an experiment to see whether I can stock-pick myself. Interestingly, my best and worst performers so far (in the 18 months I’ve been investing my SIPP) are dominated by these shares.

I participated in the initial public offering of the mini computer maker Raspberry Pi, which netted me a quick profit and allowed me to take some of my initial investment out already. The online property portal Rightmove has shot to the top of my gainers list after it rejected a takeover bid from Australian firm REA, and the US insurer UnitedHealth isn’t too far away.

In terms of the performance of my collective funds, Aberforth and Patria are both up around 20%.

The English winemaker Chapel Down sits at the bottom of my performance chart, down about a third, but that was a small token investment because of the shareholder discount you get on their products rather than anything.

The biggest disappointments have been the luxury goods seller LVMH and the Guinness brewer Diageo, which have fallen a good 12% on fears that demand from emerging markets will continue to weigh on their sales growth.

My worst-performing investment trusts are headed by Fidelity China Special Situations (FCSS), where I hope that the cheapness of the country’s equity market will out, and Impax.

Press continue to read the full article...