Investor Views: “I Ditched Cash ISAs and My Money Grew”

Private investor Alexandra Dawson tells Morningstar why she has chosen a ready-made portfolio of funds instead of keeping her savings in cash

Emma Simon 20 January, 2016 | 3:10PM
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Corporate artist Alexandra Dawson started investing to provide for her family’s future.

I’ve been lucky, and saw market rise steadily for the first few years

She says: “I work in design and post-production, and do have a small company pension.  But I know this isn’t going to be enough to rely on when I’m older, so I want to try to save what I can.

“A lot of people in the arts don’t really talk about finances, but I think it is important to secure my own future - and that of my young son.”

She said prior to the global recession she had largely saved in cash ISAs and ordinary savings accounts, but with interest rates plummeting she decided to move up the risk ladder and invest in the stock market.

Dawson says she found the choice of funds available somewhat daunting, so decided to invest in a ready-made fund-of-funds portfolio through the online broker Rplan.

She has selected a medium risk option which splits her money across more than 15 funds, investing in a range of assets. These include Old Mutual UK Alpha, Jupiter European, Schroder Tokyo and Aberdeen Property Trust - as well as several bond funds.

The Old Mutual UK Alpha fund has been awarded two-stars from Morningstar, and its manager, Richard Buxton has a silver-medal rating. Morningstar analysts say: “[This fund] continues to benefit from the stewardship of an immensely talented UK equity manager, although we have some reservations about Buxton’s appointment as CEO of Old Mutual Global Investors.”

However despite this additional executive management role, analysts said they were pleased to see “he has strong support from senior investors in the UK team”.

Opportunities Across the Channel

Jupiter European is a “stand-out fund in its sector” according to Morningstar and has achieved the rare honour of getting both a five-star performance rating and a coveted Gold Rating for the manager Alexander Darwall.

Morningstar analyst Muna Abu-Habsa says: “The fund has many of the features we like to see: a talented long-standing manager who is part of a highly experienced European equities team, a diligent investment process that has been proven through time and a consistent of approach on which investors can rely.”

Turning Japanesey

Schroder Tokyo is another first-class offering. The manager Andrew Rose, who has run Japanese equity portfolios since the 1980s, also has a Gold Rating, and the fund has been awarded five stars by Morningstar reflecting its strong outperformance against the sector.

The Gold Ratings reflect Morningstar’s confidence that these managers will continue to outperform peers.

Not surprisingly, Dawson says she has been pleased with the returns she made on her money so far. A diversified portfolio, comprised of some of the best of breed funds has mean she has earned returns of between 11% and 14% a year since she started investing.

Volatile Returns but Long-term Growth

“I know that returns are likely to be more volatile, but these are long-term savings,” she says. “I’ve been lucky, and saw market rise steadily for the first few years of my investment.”

Dawson is determined to stick with this long-term pan, even if markets get a choppier from here.

Rather than invest monthly, Dawson adds to her portfolio two or three times a year.

“I know I’d probably be better investing smaller amounts on a regular basis to help smooth out the ups and downs of the market. But my income, and my outgoings, can be quite variable, so I prefer to wait and only invest when I know this is cash I can spare.”

She adds: “I know I could put more money into a pension and get additional tax relief, but I like the idea that I’m not locking this money away for 20-odd years. The intention is certainly to keep this money invested and not withdraw it, but in an emergency it’s nice to know that this safety net is there.”

Dawson says she likes the fact she can see exactly where her money is invested, and that costs are minimal.

“I don’t have to stick rigidly to the portfolio they have selected. If I want to, I can add funds, or even take some out. As I’m fairly new to investing I’ve tended to stick to the model portfolio, but I like the idea that as I learn more I can start to make my own decisions.”

What funds are in your ISA or SIPP? What have been your most successful investments to date? If you'd like to feature in Investment Views and tell us about your investment strategy please contact the Editorial team at UKEditorial@morningstar.com

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.

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About Author

Emma Simon

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