"I'm Investing to Buy a Holiday Home"

Investor Views: Private investor Claire Morris hopes investing her Isa in fund-of-funds will help her buy another property, despite their higher fees

Emma Simon 24 March, 2021 | 1:39PM
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investor views

Claire Morris is hoping her investment will help her buy another property as well as support her and her husband in retirement.

Claire, 40, has been investing for around 12 years and while her main goal is saving for retirement, there are other things she wants to do with the money too. Ideally she wants to use some of her gains to help her son on to the property ladder – as he is currently just four months old, she has a long time horizon over which to invest.

She says: “Nothing is set in stone at the moment and it depends on how the money grows over the next few decades, but hopefully at some point we can purchase a second property that can be used for holidays for us, our family and friends.”

I Asked my Family for Investment Help 

Claire, who lives in Bath, initially sought help from family when deciding where to invest her money. “I had some additional disposable income each month and was unsure what to do with it,” she says. “After a chat with family, I decided to open my first stocks and shares Isa and have been putting money into it ever since.”

As well as her own stocks and shares Isa, her husband also invests through an Isa – both through Chelsea Financial Services – and Claire also saves into a pension. With more than 20 years left until retirement age, she is happy to take a fair amount of risk in her investments and uses Chelsea’s range of fund-of-funds, which are tailored to certain risk profiles.

Claire likes the fact that these portfolios invest in stock markets across the globe and enable her to invest in a broad range of funds, with a manager in charge of balancing these various holdings to meet her chosen risk level. “Given my age, the main bit of my pension is invested in the VT Chelsea Managed Aggressive Growth fund, and this has performed extremely well for me over the years.”

While the word “aggressive” might sound a bit daunting, Claire thinks it makes sense to take on more risk as she investing for the long-term. This particular Chelsea fund has a five star rating from Morningstar, reflecting its strong performance relative to peers. According to Morningstar data, it has delivered annualised returns of 12.36% over the past three years.

As an aggressively managed portfolio, it is not surprising that the lion’s share of this fund is in equities and other higher-risk assets, with a low exposure to assets such as cash. While largely investing in equities the fund can hold other assets such as commodities and infrastructure - again through collective investment schemes - if the managers deem this appropriate.

At the moment, some of its largest holdings are in US and emerging market funds. For example, its biggest holding at present — accounting for almost 10% of assets — is in Fidelity Index US. It also has holdings in Baillie Gifford Japan, BlackRock European Dynamic, Fidelity Global Special Situations and Fundsmith Equity.

Why I Choose Fund-of-Funds

Many of these are popular retail funds that have delivered strong returns for investors in recent years. Investing via a fund-of-funds structure can involve some additional charges, but Claire likes the peace of mind of knowing this part of her pension portfolio is being managed on a day-to-day basis by professionals. The fund has also outperformed her husband’s pension, which he chose to invest elsewhere.

She adds: “Previously I have invested directly in an investment that turned out to be a bit of a disaster. Fortunately I didn’t invest too much but I learned that researching your own investments is absolutely vital, otherwise I would recommend leaving it to the professionals.”

Morningstar points out that there was a recently a fee hike on this VT Chelsea VT Aggressive Managed portfolio, with the ongoing charge currently 1.04%, but its fees are still broadly in line with similar offerings within the market. Claire, meanwhile, is keeping a watchful eye on her investments at present: “With so much volatility at the moment it would be easy to make a wrong decision. For now I am sticking with my existing investments but will continue to review these as we come out of lockdown.”

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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