Surendran Chandrasekaran works as a consultant in the NHS. He contributes regularly to two investment accounts in the hope this will ensure a comfortable retirement as well as contributing towards his children’s education.
Chandrasekaran splits his savings between an ISA account and a share dealing account – dependent on the time horizon. He explains: “I have one pot that I use for shorter term savings. This might be for holidays or to ensure we have funds should we need them in an emergency.”
He says he usually contributes between £100 and £400 a month into this pot.
“The longer-term pot is slightly different,” he says. “I tend to research this more thoroughly, which involves looking at various websites and investor journals. I also tend to invest larger lump sums of up to £1,000 at a time. But I will be investing on a less frequent basis. Generally I invest in a mix of ETFs, shares and funds, and these are help within a shares ISA.”
Both his share dealing account and ISA are held through AJ Bell.
Chandrasekaran says that he has now been investing for a number of years. Over this time he says he has realised the importance of diversifying his holdings as much as possible.
One of the key challenges, he says, is knowing when to sell. He says: “Things can go from good to bad very quickly. So it pays to keep an eye on valuations and be mindful of this.”
Chandrasekaran says he often sets a downside limit and will sell if the price of a share or fund falls to this level. This can help ensure losses remain small he says.
Small and Mid Cap Stocks for Growth
When it comes to his current holdings, Chandrasekaran says he currently invests in a number of smaller and mid-cap shares. This includes Distil (DIS) and OptiBiotix Health (OPTI) as well as the larger Macfarlane Group (MACF).
Distil is an AIM-listed stock operating in the brewing and beverage sector. It markets and sells a number of spirits, including Blavod Black Vodka and Blackwoods Gin.
The company has delivered strong returns over the past three years. According to Morningstar figures, shareholders have seen total annualised returns of 29.22% over this period; this compares to a rise of annualised returns of 11.98% in the FTSE100 over the same period of time.
However, over longer time frame returns have not been so buoyant, with shareholders seeing total annualised returns of 4.76% over a five year period.
As the name suggests OptiBiotix Health is a life sciences company. The company, through a number of its subsidiaries, is engaged in the research and development of microbiome modulators. It is also listed on the junior AIM market.
Again this company has seen periods of very rapid growth. Like many smaller companies returns can be volatile, and this is seen in the returns delivered in recent years.
According to Morningstar data, shareholders have seen total annualised returns of 45.92% over the past five years. However over a three year period the total annualised return is just 2.44%, while over the past year, shareholders have again seen far more buoyant returns - with total annualised returns of 49.57%.
Chandrasekaran also has a holding in the Macfarlane Group, listed on the main London market. The company designs and manufactures protective packaging products and labels for other businesses, and shares have risen strongly in value over the past five years.
Shareholders in Macfarlane have enjoyed total annualised returns of 23.48% over this period; this compares to annualised returns of just 5.69% in the FTSE 100 over the past five years.
Choosing ETFs Over Funds
Chandrasekaran says at present he doesn’t hold any active funds, preferring to invest in a range of ETFs. He uses these, for example, to track emerging market indices. This he says helps to create more diversification within his portfolio.
He says: “Previously I had a holding in Woodford Equity Income. But the fund went through a bad patch, so I have sold it.”
This fund has a Bronze Rating from Morningstar analysts, but it currently has just a one-star rating, reflecting the relatively under-performance in recent years.
Morningstar analyst Peter Brunt points out that Neil Woodford – the manager of the fund, who set up his own investment house - has a “impressively strong and consistent track record”. He ran a similar equity income fund during almost three decades at Invesco Perpetual.
However Brunt adds: “A number of high-conviction holdings have experienced stock-specific problems over the past couple of years. While contrarian investing comes with a degree of risk and issues could be expected from time to time, the nature of some of the problems and respective position sizes in the portfolio give us cause for concern.
“For investors who can tolerate periods of underperformance, we believe that the fund still has long-term investment merit, but in light of our above concerns, our conviction has waned.” As a result the Morningstar Analyst Rating has been lowered from Silver to Bronze.
Chandrasekaran says that he has recently sold a few holdings, and is taking a more cautious market stance. “When the market fell quite sharply last October I did take money out of my shorter-term savings pot. I needed some of the capital at the time so this made sense. However I am currently waiting for market clarity before I start re-investing again.”
However while he has taken a more cautious approach to his shorter-term savings he says that investments in his longer-term ISA pot remain untouched.
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