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Investor Views: "My Investments Paid Off My Mortgage"

Private investor Nevin McAnea made strong gains from a portfolio of stocks, funds and ETFs, meaning he could pay off his mortgage early

Emma Simon 15 March, 2017 | 2:22PM

Nevin McAnea started investing when he was made redundant from his job, 25 years ago. “I was a turner by trade. Most of the other guys used the money to buy a car or go on holiday,” he remembers. “We were pretty young at the time, but I decided to invest this payout instead.”

Rather than putting the money in a savings account, he bought a selection of shares. These included holdings in the investment firm Save & Prosper, the Northern Ireland Electricity, Abbey National, now part of Santander, and BT (BT.A).

Most of these companies, aside from BT, have subsequently been subject to buyouts or mergers. But over the period McAnea held these shares he said he saw a decent return on his money. “This redundancy money invested over six or seven years helped us pay off our mortgage early. It has certainly been a huge help financially,” he said.

McAnea lives in Belfast, Northern Ireland, with his wife and three daughters. He says: “Investing has become a bit of a hobby for me. I’ve never had a company pension so I’m partly investing for my own retirement. It has helped makes life a bit easier too. We’ve been able to pay for holidays and other little treats along the way.”

He adds: “I’m just an ordinary working guy, not a financial expert, but I’ve enjoyed researching the share and funds I buy. Some people like doing up cars, I prefer doing this instead.”

Stock Picking is Now “More Difficult”

But McAnea, who now works in the engineering sector, says he has found it far harder to make decent returns over the past five to 10 years, particularly by investing in individual shares, saying: “It seems like the experts have a lot more information than you. It’s become more difficult to spot good opportunities.”

Instead, he has focused his attention on unit trusts, ETFs and other mixed-asset portfolios, which better suit his investment horizon. He says: “I’m a bit older now so I’m not quite as aggressive with my investments.”

However, this does not mean he has abandoned individual shareholdings completely. McAnea still has a few “old favourites” in his portfolio. These include BP (BP.) and Standard Life (SL.).

The multi-national oil company BP has a three-star rating from Morningstar, meaning equity analysts consider the stock to be trading at fair value. Although Morningstar analysts say it does not have any economic Moat, meaning its markets could be vulnerable to competitors, it points out that BP is lowering its cost base to survive in world of lower oil prices. Shares prices have been bolstered by weaker sterling: over the past year the value of BP shares have risen by 41.8%. Over five years though, gains are just 3.5%.

The pensions and savings giant Standard Life, which has its head office in Edinburgh, recently announced it was merging with Aberdeen Asset Management. Shares have seen steady growth in recent years. Over five years its share price is up by 10.6%, although over three years they have recorded a fall of just over 1%. The company, which does a lot of its business in the UK, hasn’t been helped as much by the falling pound. Its shares are up just 7.11% over the past 12 months.

Learning from the Less Successful Stocks

Not all his shareholdings have been as successful. McAnea said he got his fingers burned investing in Tesco (TSCO). He says: “I watched from the sidelines as shares in the retail giant took a hammering. I decided it might be worth dipping my toe in the water so I bought a few Tesco shares.

"Just after I bought the company announced that there had been some accounting scandal, and the shares nose-dived. I think this is partly why I got fed up buying individual shares. When the people that run these companies are putting out duff information ordinary investors can’t win.”

McAnea held onto the shares until they recovered, and sold them for a £10 profit.

Passive Funds for Pension Saving

Today, he mainly invests new savings into funds and ETFs. This includes a pension portfolio with Nutmeg. This online wealth manager builds low-cost portfolios from ETFs. They exact weighting will depend on the risk-profile you choose.

McAnea says: “For a while I had my pension with a traditional face-to-face wealth manager, but I found the fees to be very high.”

Elsewhere, he has a holding in Fundsmith Equity. This global equity fund, managed by Terry Smith, has a five-star rating from Morningstar, reflecting its strong performance in recent years. It also has a bronze medal rating, reflecting the analysts’ confidence it will continue to outperform peers.

Muna Abu-Habsa, an analyst at Morningstar says: “Smith looks to invest in compoundable earners, which ideally he could own forever. Ultimately he aims to invest in companies that are already winners and does not seek to identify tomorrow’s winners.” She points out that this leads to a fund with significant biases, but says, performance terms, the fund appears to be in a “sweet spot”.

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
BP PLC463.45 GBX0.88
BT Group PLC286.75 GBX-0.03
Fundsmith Equity R Acc3.26 GBP-0.33
Standard Life PLC417.69 GBX1.01-
Tesco PLC183.58 GBX-1.57
About Author Emma Simon

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