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"I'm Investing to Move Up The Property Ladder"

Investor Views: Private investor Sarah Roberts splits her money across a range of different funds, including UK and global growth

Emma Simon 18 September, 2019 | 12:04PM

New house

Sarah Roberts is hoping her savings will help her and her husband move into a bigger home.

30-year old Sarah, who got married in August, says: “Our savings and investments have helped us buy our first flat, and pay for a wedding. Now we are saving for our next home, one that will hopefully have stairs and a garden, and maybe even an extra bedroom.”

As well as trying to move up the property ladder, Sarah also has longer and shorter-term savings goals. This includes saving for retirement, via her workplace pension, as well as future holidays.

Sarah tries to put aside at least £500 a month; this includes around £300 into an ISA, and £240 into her pension. This pension gets topped up by her employer and she also receives tax relief on these contributions.

Sarah also makes additional payments into her ISA at the end of the tax year if she has any surplus savings.

When it comes to deciding where to invest her money, Sarah splits her money across a range of different funds. These invest in a variety of different assets — from UK and global equities to commodities.

Sarah, who works in financial services, says the sheer number of different funds available can be quite daunting. “I have my ISA with Chelsea Financial Services, and have used their fund recommendation lists to help narrow down the choice.” She says she has generally been happy with the selections she’s made as a result.

Focused on Growth

She has focused on growth funds and is prepared to take a degree of risk with her money, as she is generally investing for the longer term. “I need to look at funds paying an income or dividends and am comfortable with a relatively risky fund. However, when we get closer to buying a house I may well move some of these assets into cash.”

Her ISA is currently invested in two main funds. This include Chelsea’s own managed portfolio of funds: the Chelsea Managed Aggressive Growth fund, and Silver-rated Rathbone Global Opportunities.

Sarah says: “I decided to invest in this managed fund about 18 months ago, as it does the hard work for me, changing funds and asset allocation as appropriate.

“I’ve gone for the most aggressive investment options here as I’m investing for the long term.”

Sarah has a diverse mix of funds within her pension. This includes investment in a couple of global funds, including the Gold-rated Fundsmith Equity — and another holding in Rathbone Global Opportunities.

Sarah says: “The Fundsmith Equity fund certainly seems to be popular. I have seen a lot of information and articles about this fund, and my family also invest in it. In some ways, it might seem like I am jumping on the bandwagon but it has been a good bandwagon to be on as it has performed really well.”

Morningstar says that Fundsmith Equity remains a “strong option” for investors seeking exposure to high-quality global equities.

The fund’s manager Terry Smith co-founded Fundsmith in 2010. Smith’s investment philosophy is to buy and hold, ideally forever, high-quality businesses that will continually compound in value.

Returns since then have been excellent, delivering annualised returns of 21.01% over the past five years, according to Morningstar data.

But Morningstar analyst Peter Brunt point out that this approach is not without risk: “This is a very high-conviction and long-term approach. There are elements of sector concentration (large parts of the market are excluded) and elevated valuation risk in the portfolio, and returns may look at odds with the broad MSCI World Index over the short term.”

But Brunt adds: “While returns have benefited from style tailwinds since launch, we believe Smith has added significant value above and beyond the strategy's style bias.”

Five-star Funds

Elsewhere, Sarah also has holdings in TB Amati UK Smaller Companies and Evenlode Income — both of which have five star ratings from Morningstar, reflecting their strong performance against peers in recent years.

Sarah says: “I wanted to have some UK holdings in my portfolio and I liked the sound of both of these.”

TB Amati UK Smaller Companies has a Bronze rating from Morningstar. It points out that the fund is run by an experienced team, whose ‘bottom-up’ approach to stock picking has been the primary driver of outperformance over the long term.

For diversification Sarah says she also has an investment in Pictet Water, as well as a small holding in HC Charteris Gold & Precious Metals.

Sarah says: “Quite embarrassingly, the reason I chose to invest in Pictet Water, was from watching the film The Big Short. I would love to say that this is because I am worried about climate change, but if I am brutally honest, it is because I thought the fund would perform well — in the film a guy invested in water and it rocketed!”

This holding has, she says, done well to date. But her investment in HC Charteris has not performed as well.

“I wouldn’t say this has been an out-and-out disaster, but I probably did put money in too late. A few people I knew were invested in this fund, and it had gone up. But it took a dip after I invested and has not yet recovered to levels I started investing in.”

She says this sudden drop in values “was certainly a shock”. Fortunately she says it wasn’t a “life-changing amount of money” that she had invested.

“I have left the small amount invested in the fund, in the hope that it will recover. If I need to take any money out of my savings I avoid this fund, and take from those that have made money, so not to crystallise the loss.”

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.

About Author

Emma Simon

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

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