Investor Views: ‘I'm Backing Rated Trusts'

After initially investing in AIM shares, Huw Bell is looking at a more diversified range of investment trust holdings 

Emma Simon 5 May, 2022 | 9:15AM
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Woman with piggybank

Private investor Huw Bell’s first forays into the stock market were not particularly successful, but this has not dampened his enthusiasm for investing.

He has subsequently built up a portfolio of investment trusts and ETFs which are now delivering good returns in his SIPP and ISA.

Huw is now in the Army Reserves, after 10 years in the RAF, and in this role was part of the team helping with the UK’s Covid pandemic response.

He currently contributes to his employer’s pension, and has two older pensions, from his time in the RAF and from a period of self-employment. He has looked to supplement these by investing in a range of tax-efficient savings vehicles.

Huw invests in both a SIPP and an ISA, and he also has a Lifetime ISA. Alongside these he has separate cash and Premium Bond holdings, and also invests in gold and Bitcoin as well as a general dealing account through which he invests in a number of direct shareholdings.

Huw, who is 41 and lives with his wife in Yorkshire, initially started investing in AIM-listed shares in the wake of the financial crash. “These were mainly in miners and oil and gas explorers, but I had fairly mixed results. After an unsuccessful property investment and a long wait to recover assets from that I set up a Sipp in 2020.”

Time to Diversify

From this early experience Huw has learned to diversify his holdings far more. Although he invests in higher risk holdings, such as Bitcoin, VCTs and direct shareholdings these make up a relatively small part of his overall portfolio. For example, he has just 0.09% of his money in his Bitcoin and 1% in VCTs. In contrast he has 31% in his ISA and 21% in his SIPP.

Huw is also now far more focused on fees and trading costs than he was previously.

“Before I largely invested in funds recommended by the platform I used at the time. However I have switched to building a portfolio of investment trusts and my SIPP and investment trusts and ETFs in my ISA. On top of this I also invested in about 40 shares that I thought had the potential to recover post-Covid.”

He invests regularly into these different savings vehicles. “I make the most of regular savings and have used pound/cost average to build up an investment portfolio gradually. I also try to ensure dividends get reinvested to further boost returns.

“The other thing I’ve learned over the years is not assume that every investment will be a winner.”

Gold-Rated Holdings

Within his Sipp, which is held with AJ Bell, Huw has five main investment trust holdings. This includes Scottish Mortgage (SMT) which has been his best-performing investment. He also invests in Personal Assets (PNL), RIT Capital Partners (RCP), Temple Bar (TMPL) and Northern Venture Trust (NVT).

Scottish Mortgage has both a Gold Analyst Rating and 5-star rating from Morningstar. This is a trust with a “hyper growth mandate” according to Morningstar analysts, with high exposure to both the US market and tech stocks in particular. But it has suffered a relatively poor 2022 so far, shedding 30% in share price terms. Its long-term lead portfolio manager James Anderson also retired in April this year.

This needs to be weighed against stellar longer-term returns, with the trust delivering annualised gains of around 20% over three, five and 10 year periods. Morningstar analysts point out that the retirement of its manager has been well planned for, with an experienced team in place to succeed him, including deputy Tom Slater who now takes the lead.

Huw is not too concerned about the recent poor performance, and has used the drop in share price as an opportunity to top up his holding in this trust.

Personal Assets is another Gold-rated trust which is described by Morningstar analysts as “a strong choice for investors seeking capital preservation and long-term capital growth”.

This is a multi-asset trust that has a strong defensive track record. Manager Sebastian Lyon is a cautious investor who believes that preservation of wealth, particularly during market downturns, is an important step in the overall growth of assets over the long term. Morningstar points out that this ethos has served investors well over time.

Huw also has an ISA with Interactive Investor. Through this he invests in a range of trusts and ETFs. These ETS track both UK, emerging markets and US indices. Alongside this he also targets some specific India and Vietnam holdings, as well as have exposure to real estate investment trusts (REITS) and silver.

 

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