"Why I Invest in a Fund-of-Funds"

Investor Views: Private investor James Frack says opting for a managed portfolio has helped take the stress out of his investment strategy

Emma Simon 2 December, 2020 | 11:26AM
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Investor views

James Frack started investing 12 year ago in a bid to grow his money and try to get on the housing ladder. Now in his 40s, he is currently focused on building financial security for his family and saving for retirement.

James, who lives in Worcestershire with his wife and five-year old son, says: “Looking after my family is important and knowing my Isa savings are there if my circumstances change stops me from stressing out.”

Over 12 years of investing, his pot has helped fund a house deposit, paid for an extension, and also bought a new family kitchen. “I certainly couldn’t have done all that if I had just been putting my money into a high street savings account,” he says.

James currently splits his investments between various tax-efficient savings plans; he has a pension and he and his wife each have an Isa. They have also set up a Junior Isa for their son: “His grandma contributes to this via a monthly direct debit as she wants to have an active part in saving for his future too, and we also tend to put in some of his birthday money each year - it seems a better option than the house being filled up with Nerf guns!”

But James, who works in IT, says that investing can be nerve-wracking at times. He found that out quickly, given that he first started investing just before the 2008 financial crash. James was so concerned about his finances at the time that he stopped investing, but now regrets this as he realises he likely lost out on returns as the market recovered after the crash.

Don't Panic

The experience has helped him remain more level-headed during this year’s market turmoil. “I did have a few sleepless nights, but not about my investments this time,” he says. Regular emails from his Isa provider, Chelsea Financial Services, helped put his mind at ease, he says. “As a result, I didn’t panic like I did in 2008 and have kept investing in both my Isa and pension through the year, and my investments have actually performed really well.”

James holds the VT Chelsea Managed Aggressive fund, a fund-of-funds with a long-term growth strategy and higher risk profile. The fund invests in a number of other funds rather than directly into equities or bonds. It was launched in 2017, and has a four-star rating from Morningstar, reflecting the fact it has outperformed its benchmark and peers more recently. According to Morningstar data, it has delivered annualised returns of 8.94% over the past three years. Its largest holdings include Fidelity Index US, Baillie Gifford Japanese Fund and Artemis US Extended Alpha.

Fund-of-funds have become an increasingly popular option over recent years as they provide a one-stop shop investment option for individuals who don’t have the time, skill or confidence to construct their own portfolios. A fund-of-funds can provide peace of mind as an expert fund manager is making the asset allocation decisions for you. According to Morningstar data, there are now around £150 billion of assets under management in these funds, although one downside is they often have higher fees than other funds.

James says investing in such a fund has made it easier for him to manage his money and has ensured he has remained diversified through this year’s tumult. It’s also helped him stick to the most important lesson he’s learned about investing: to keep saving, regardless of market conditions.

Setting up a direct debit makes this easier, says James, rather than having to remember to invest each month.  He adds: “Investing on a monthly basis is easy and it is quite amazing how it builds up over time. You don’t need thousands of pounds to invest but it doesn’t take too long before you are sitting on a reasonable nest egg.”

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

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