Will My Low-Cost Investments Deliver Superior Returns?

Investor Views: Private investor Amelie Mollet is hoping low-cost ETFs will help boost her retirement fund

Emma Simon 3 July, 2019 | 11:27AM
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Cash savings

Amelie Mollet is looking to boost her retirement savings after neglecting these savings earlier on in her working life. 

Amelie, who has worked for various art galleries in a sales role, is now a freelance project manager. She says: “Much of my work involves helping organisations bid for funding. It made me aware that I needed to put a similar effort into making sure my own finances are on as secure a footing.” 

She lives in London with her solicitor husband Mark and their two children. She says: “Mark has a decent pension through work, but I thought it was important to build up some savings for myself.” 

This wasn’t easy after having children. After her maternity leave, she left her previous job as it couldn’t offer the flexibility she needed, and started freelancing. “Initially, I was only taking on small projects sporadically, so there really wasn’t sufficient money to think about savings. 

“But in more recent years I’ve built up a reasonable portfolio of work which has allowed me to focus on my own finances."

Nutmeg Pension in ETFs

Amelie, 47,  now contributes to a pension via Nutmeg, the online wealth manager. This fintech company runs a number of risk-rated portfolios. She says: “They are easy to use and they seem relatively low cost. I wasn’t confident about building a portfolio of funds, and didn’t want to pay for financial advice. 

“This seemed to be a good halfway house between the two. My portfolio is invested across a mix of global shares and bonds. This includes emerging market equities and bonds, as well as some money market funds.” 

These portfolios comprise ETF investments, whiich helps keep costs down. Amelie is in the portfolio with a risk rating of seven (out of 10). Since she began investing in 2016, she has seen a 15% return on her money. 

“I am quite happy with this. I am investing around £500 a month into the pension and it has increased steadily. However, I am not too sure how this compares to other portfolios - or, similar mixed asset funds elsewhere," she says. 

Amelie is keeping her focus on the long-term, and does not anticipate accessing her money for at least another 20 years. She adds: "As a result I am not sure whether it makes sense to move up a “risk level” to try to boost returns. It would be useful if Nutmeg published performance data on the different portfolios they run but I can’t seem to locate this information. Economically things seem a little uncertain at the moment, so I am not sure if this is the best time to increase risk.” 

Elsewhere, she has various other savings and investments. “They are a bit hotch potch. That’s one reason I wanted to start the pension to ensure that I was putting money away on a regular basis.” 

She has an Isa with Legal & General, in which the money is split between a FTSE 100 tracker fund and a European tracker. She set this up almost 20 years ago, when she had just bought her first flat with an interest-only mortgage and started saving into the Isa as a means off paying off the mortgage. 

She adds: “However, shortly after I set it up, the stock market crashed, and although I keep paying in for several years, it did feel a bit like throwing good money after bad.”

Interest Only Mortgage Ditched

After getting married and moving house she switched to a repayment mortgage. “My husband is a bit more sensible about money and was slightly aghast that I had an interest-only loan with no real means of repaying it. Since then that Isa has just sat there. I haven’t contributed for a number of years, but it has grown in value more recently.”

Amelie isn’t sure whether it would make sense to shift this money into her pension. This would enable her to get tax relief on these contributions, but it would mean that she could’t access these funds until her 55th birthday. 

The Legal & General UK 100 Index tracker has a three star rating from Morningstar, and a Neutral Analyst rating. Morningstar analysts point out that this The FTSE 100 Index is concentrated in giant-caps, which leaves investors underexposed to the other segments of the UK market.

This reduces the odds of this trust outperform better diversified funds, such as active funds that can switch between larger, mid and small cap stocks, as underlying economic conditions change. It says: “On the passive side, we have a more favourable view of funds that track the broader FTSE All-Share.” 

However, analysts add: “If investors are simply looking for exposure to the largest-cap segment, the L&G FTSE 100 tracker is hard to fault. 

“With an ongoing charge of 0.10%, this fund is not the cheapest [on the market]. But it boasts a minimal level of tracking error, and we have a positive view of L&G and its index portfolio management team.” 

Amelie also has money in NS&I Premium Bonds, which she has held for a number of years. With her job changing from full-time to part-time or freelance work, Amelie wanted accesible savings.

She admits that the returns are poor but not much worse than bank savings, and there's a remote chance of a £1 million jackpot. She wins the odd £25 from Premium Bonds, which she usually spends.

Having invested at the top of the market in the 1990s, Amelie is nervous about putting a one-off large sum into equities, especially with shares currently at high levels.


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