"The Higher-Risk Shares That Balance Out My Portfolio"

Investor Views: Private investor Will James takes punts on Aim-listed shares alongside cash Isas and Premium Bonds 

Emma Simon 4 September, 2019 | 1:10PM
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Will James may only be in his mid-20s, but he had already built an wide-ranging investment portfolio. Although it may be several decades away, he is hoping that these various investment will allow him to retire early.

He says: “The main reason I invest is because of the financial opportunities it brings. My goal is to support my primary income with longer-term asset growth rather than a steady stream of cash, with the intention of assisting me in an early retirement.”

Will has taken a keen interest in current affairs, particularly news regarding business and the economy as well as how political changes can impact these. As a result he enjoys researching different companies to invest in, rather than finding it a tedious exercise. 

Will, who works as an account manager in the consumer goods industry, currently overpays into his pension, in a bid to boost his retirement savings. However, he points out that he doesn’t have too much control about how this money is invested.

When it comes to his other investments though, he has selected an array of different assets. He explains: “I have some very low-risk investments, such as a Help to Buy ISA, which is invested in cash, and some Premium Bonds.” He hopes that in these products will help him buy his first home with his partner. 

Alongside these, Will has a stocks and shares Isa through which he invests in funds and individual shareholdings. Will says that as these are longer-term investments he is prepared to take a bit more risk with these savings. Among his holdings are a passive tracker fund, as well as a variety of FTSE 100 and Aim-listed shares. 

Some of these holdings have done extremely well, while others have delivered less impressive returns to date. Two shares that have delivered decent returns are drinks manufacturer Fevertree (FEVR) and the online grocer Ocado (OCDO). 

“Fevertree has been a great pick over the last couple of years, although it has had a miserable 2019 so far,” says Will. The company manufactures premium mixers for alcoholic drinks and distributes them to pubs, restaurants and supermarkets. It enjoyed a phenomenal run, with shares going from 610p at the start of 2016 to 3863p by mid-2018, according to Morningstar data.

However, share prices have slid back over the past six months, and now stand at around 2297p. This translates into a loss of 37.9% over the past year, but has to be viewed alongside more significant gains over the past three years.

Ocado has also delivered stellar returns to investors in recent years. The company, at present, deliveries groceries for Waitrose and Morrison, and will start M&S food deliveries next year.

Over the past three years it has delivered total returns to investors of 61.6% — almost 10-times the return investors have seen from the FTSE 100. Although growth might have slowed more recently, Morningstar figures show that the company has still delivered total returns to shareholders of 23.9% over the past year.

To date, one of Will's biggest mistakes has been investing in Saga (SAGA). The company, which floated on the stock market in 2014, has delivered disappointing returns for investors. While there were modest returns in the first couple of years — from 185p to a high of 225p — Saga’s share price has fallen significantly since the end of 2017, and now stands at just 39.10p.

For investors, this translates into total losses of 16.8% over five years and losses of 34.4% over three years. Those that have hung on, hoping for a turnaround have been particularly badly hit, with the company showing total losses of 64.4% over the past year.

Will says: “I signed up to the IPO with the intention of holding the shares for several years. But this has been so far my biggest mistake.”

However, Will says he has learned from this experience: “This has taught me to make sure I research not only the company, but the wider industry I am investing in, in this case the UK insurance and traditional travel markets. I also think it’s important to know when to get out, and for me with these Saga shares it should have been a while ago!”

Will says when it comes to selecting shares for his portfolio he tries to achieve a balance between higher and lower risk options.

He explains: “For me, it is all about this balance. Larger rewards always come with more significant risks, but I think there are ways you can balance this. I enjoy picking stocks and taking an interesting in the company, even though I am aware the risk levels of individual firms are higher, when compared to investing in funds.”

To try to mitigate these risks, Will invests across different sectors and in companies of varying sizes, holding smaller airline companies alongside blue-chip oil companies, for example. 

Will normally deposits a lump sum into his Isa once a year, although he invests into his pension and also purchases shares in his employer on a monthly basis.

However, he has held back from making investments more recently, partly because he is concerned about what effect Brexit and any associated economic turmoil might have on markets.

He says: “More recently, as a result of doing more research, I’ve been happier to invest larger chunks into one single investment, to help reduce costs and dealing fees. But I’ve held back from making further investments more recently. Brexit is definitely a concern.”


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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Emma Simon

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

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