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Investor Views: “I’m Using my ISA to get on the Property Ladder”

Young investor Kristina Wu tells Morningstar why she’s hoping stock market returns will keep pace with house price increases in the South East

Emma Simon 9 March, 2016 | 11:56AM

With less than one month left of this tax year time is running out for ISA and pension investors – or anyone looking to boost their savings and reduce their HMRC bill. Read our Guide to ISAs, Pensions and Tax-efficient investing to make sure you don’t get left behind.

Kristina Wu might only be 24 but she’s already started investing for her future. She says she’s hoping her ISA will enable her to get onto the property ladder.

Young investor Kristina Wu who is saving to buy a property“When I first started working I was saving money into a cash ISA, but my money wasn’t growing at all,” she said. So instead she has now moved this money into an investment ISA, and hopes her disciplined approach to saving will lead to better returns.

The ISA is invested in seven different equity funds. She says: “I know I have to be prepared to lock my money away for at least five years. I’m not looking to buy immediately, so I hope that the returns I make will ensure that my savings keep pace with house price rises.”

Wu works as a project co-ordinator for an IT company in Brighton. House prices in the surrounding area are expensive, and have risen strongly in recent years. It’s not just a deposit on a house she’s looking to fund from these investments. She adds: “That is the long term plan. I’m also saving for laser eye surgery and a holiday. So hopefully this will all help.”

Wu says she tries to be disciplined about saving; she hasn’t set up a standing order to automatically deduct a slice of her earnings into her ISA but transfers an amount into the ISA each payday, then will also tops it up if she has any surplus cash at the end of the month.

“I like to have a bit of flexibility. But I know it’s better to pay the money into the ISA at the start of the month, before I’ve had a chance to spend it.”

Long Term Investing in Equity Funds

She says initially she invested her money into four funds, but has now expanded this, so the monthly sum is split across seven different equity funds which cover various geographic regions, sectors, and risk profiles. Wu invests through Fidelity Personal Investing and says she likes the range of funds on offer, and the flexibility this service offers, enabling her to vary contributions and the funds she has within this tax-free wrapper.

These currently include Artemis Income, CF Lindsell Train UK Equity, Rathbone Global Opportunities, Old Mutual UK Mid Cap, and Fundsmith Equity. This spread of funds means Wu has money with some of the best-performing managers in the UK, according to Morningstar.

Artemis Income, a UK equity income fund, is managed by the “distinguished pairing” of Adrian Frost and Adrian Gosden, who have a coveted Gold Morningstar analyst rating. The two have worked together on this fund since 2003, and have more recently been joined by Nick Shenton.

Simon Dorricott an analyst at Morningstar says: “The managers are disciplined in applying a process that is proven over the long term.”

He points out that the fund has seen some unexciting returns, relative to the other equity income funds in recent years, but over Frost’s tenure it has outperformed by a healthy margin.

CF Lindsell Train UK Equity, run by Nick Train, is another star performer with the manager again awarded a Gold Rating from Morningstar. The fund has a five star rating, reflecting its strong outperformance in recent years, and through different market cycles.

Morningstar says Train is a “seasoned and talented UK equity manager who has demonstrated a highly consistent approach”. He takes a bottom-up approach, looking for businesses that can prosper through different cycles. “The result is a concentrated portfolio with clear biases. Turnover is low given his time horizon… This process has led to strong absolute returns.”

Looking Further Afield for Investment Gains

Rathbone Global Opportunities is another five-star rated fund, and its manager James Thomson, who has been involved with the fund since it launched in 2001, has a Silver Rating. He does not apply an initial quantitive filter on stocks, instead choosing to only invest in companies that, in his words, “can control their own destiny”.

This means the fund doesn’t hold material or resource companies, whose profits can be dependent on commodity prices, and it also stays clear of telecoms and utility companies as regulators can have a strong bearing on these firms’ price setting ability.

Old Mutual Mid Cap is another fund with a Silver rated manager. Richard Watts is described as a “thoughtful considered investor” and Morningstar says the fund is “a solid offering for investors looking for predominantly UK mid-cap exposure.”

For longer-term returns Wu also has exposure to Japan, but here has opted for an passively managed fund; Fidelity Index Japan.

As well as her ISA she has also started investing into her workplace pension. “At the moment only a relatively small amount is going in, about 3% of my salary. But I think I should look to increase this.”

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
Artemis Income Inc227.96 GBP0.65
CF Lindsell Train UK Equity Acc391.75 GBP0.50
Fundsmith Equity R Acc3.50 GBP0.13
Old Mutual UK Mid Cap A GBP Acc463.81 GBP0.23
Rathbone Global Opportunities R Acc198.52 GBP-0.10
About Author Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk