Why I’m Passionate About Passives

Investor Views: Private investor Moira Holt is prioritising building a big pension pot before starting a family

Emma Simon 27 November, 2019 | 1:59PM

Nest egg

Moira Holt is in her mid-30s and currently works in marketing for a watersports company in south-west England.

But she says a previous job in financial services helped her gain a better understanding of the value of investing over saving in cash.

She says: “Spending time with many clients from a wealth of different backgrounds reinforced how important it was to invest for my future with the resources I have available.

“It’s second nature now to direct my surplus income into my pensions and ISAs.” Moira says she is “quite evangelical about this” and ensures she spreads the message to colleagues and friends.

Moira is diverting around 20% of her income into savings at the moment. The majority of this goes into her pension, but around a third goes into her “rainy day” ISA fund - both of which are held with AJ Bell.

This latter savings fund, she says, will hopefully give her some flexibility in life, enabling her to quit work for a period, should she want to.

“I am sure my priorities might change should I settle down and start a family, but it seems prudent right now to build as big a pension pot as I can whilst I still have the opportunity to do so.”

Moira has been a more active investor for around six years. During this period she has also consolidated several pensions to reduce fees and enable her to keep track of her investment trajectory over time.

She says: “When I started investing, the overarching aim was to have all of my pension savings in one place, diversified geographically and across different sectors. I’ve also prioritised having a low fee structure.”

Moira has stayed well clear of individual share holdings: “I don’t think my nerves could take that level of risk.”

This emphasis on low fees has led her to have significant holdings in passive tracker funds.

Adventurous Allocation

Her pension is fully invested in Vanguard’s LifeStrategy 80% Equity Fund. As the name suggests this is part of a range of five fixed-allocation funds, where the equity exposure will vary from 100% to 20%.

Given her age and stage of life she is comfortable with taking one of the higher risk portfolios, which is deemed an “adventurous allocation” by Vanguard.  

This fund has a Morningstar Analyst Rating of Gold, as well as a five star rating, reflecting its strong performance against peers in recent years.

Morningstar analyst Rajesh Yadav says: “[This fund] employs a straightforward, diversified, and low-cost approach, making it a sound long-term option.”  He points out that this range of funds, which were launched in June 2011, follow the same approach as the longer-running US versions whose funds each have a Morningstar Analyst Rating of Gold.

Moira says that since she consolidated her pensions into this one fund she has been pretty happy with the returns.“The fund has achieved 15% growth. I am happy with this, particularly given all that has happened politically and financially in the last few years.”

When it comes to her ISA, though, Moira is also invested in Vanguard Lifestyling funds, but has opted for those with a slightly more conservative approach with a lower equity exposure.

However, both the 20% Equity Fund, the 40% Equity Fund and the 60% Equity Fund all have Gold Ratings from Morningstar, and also have a five-star rating.

She says: “The growth on my ISA has been more modest due to the fact that it has more exposure to lower risk assets, such as fixed income bonds. But I’m pleased with the return and the fact that I am taking less risk with resources that I may need to access a little sooner.”

Riding Out Volatility

Moira is comfortable with riding out the inherent volatility that comes with any stock market based investment, even if the exposure to equities is more limited. However she says that there was a difference between learning about this theoretically, while working in financial services, and experiencing it first hand as an investor.

“There can be a heart in mouth feeling when your investments have gone down in value,” she says. “I haven’t had any major disaster but I did fall into the trap of tracking the value of my investments on a daily basis to start with, which was of course hideous for my soul. I quickly knocked that on the head! I keep track of my investments but don’t check them quite so regularly.”

While she is sticking with her investment strategy of sticking with diversified low-cost passives, Moira has started to look funds which take a more ethical or environmentally sound approach. “In some cases this may mean an increase in management fees or some compromise on return, but overall I hope these will help secure my future without damaging the wider world,” she says.

Moira adds: “I would hope that ensuring I’ve made adequate provision for myself in later life will help me whether any future impact of things like Brexit or the problems created by an ageing population.”

She adds that it will be decades before she retires, and there may well be other unforseen changes which may impact on her retirement. “For now it makes sense not to worry too much about such things but to simply keep putting money aside for the future.”

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.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Vanguard LifeStrategy 80% Equity A Inc187.33 GBP-0.34

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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