Investor Views: 'Baillie Gifford Taught me Investing Can be Fantastic And Terrible'

William Sharpe may just be 21, but he is keen to start building an investment portfolio 

Emma Simon 29 June, 2022 | 11:34AM
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Like many younger people stuck at home during the pandemic, William Sharpe’s interest in the stock market was piqued by the controversy around GameStop. It persuaded him he should look more seriously at investing options.

Shares in this US retailer, which sold computer games, soared by up to 700% after thousands of small amateur investors bought the stock. It caused significant losses for Wall Street banks that bet against it, believing its shares would fall.

Much of this frenzy of activity was driven by social media and online forums, although rapid gains soon turned into significant losses as trading was restricted.

This rollercoaster of activity might put off many potential investors. But Will, who is 21 and a student — though also works as a private tutor — said it sparked his curiosity. He has since been trying to educate himself on making sound investment decisions.

To this end Will has opened an ISA and says he is also considering a Sipp investment in future. Through his ISA, he invests in a couple of shares directly, alongside some funds. He invests through AJ Bell which he said was "very straightforward to use for a newbie like me".

Will says: "in total I’ve probably been investing now for roughly two years. My family work in the finance industry so this has helped. I am hoping to use some of these savings for a house deposit, though some of this will be invested for the longer term – hopefully to help me retire early one day!"

Keeping Costs Down

When selecting funds, Will is looking carefully at the costs. "Fees are a big decider for me, especially given current returns. For this reason, I have been tending towards tracker index funds for the last few months," he says.

"Another factor would be risk, as I am relatively young, I am willing to invest in riskier assets which has led to great returns but also awful returns. However, this hasn’t affected my approach and I will continue with this approach for many years."

Will has holdings in both Vanguards’ S&P 500 ETF and FTSE All-World. He says: "both of these are long-term investments. I invest on a monthly basis with the view to basically hold them forever."

Vanguard S&P 500 has a Morningstar Analyst Rating of Gold and a Star Rating of 5, reflecting the fact it has outperformed both its benchmark and peers, and Morningstar analysts expects this to continue over the long term.

The all-world tracker has a Silver rating and is described by analyst Dimitar Boyadzhiev to be "a solid choice for adding global core markets equity exposure to an investment portfolio."

Hedge and Risk

Alongside these passive funds, Will also has holdings in the Gold-rated Trojan Fund. This is more of a defensive fund, but it has performed relatively well given current more volatile markets. He holds the accumulation rather than the income shares, with any dividends reinvested.

Trojan is another vehicle with 5 stars. It has a number of positives for investors seeking capital preservation and long-term capital growth, according to analyst Tom Mills. With a highly experienced manager and consistent processes, he believes it manages to distinguish itself from the competition.

Will also has invested in the higher-risk Baillie Gifford International. He says: "this fund has showed me how investing can be fantastic and terrible. I have been an investor for just over a year and at one point I was up by around 40% but I’m currently down 8%.” Over the past three years the fund has delivered annualised returns of 6.28%.

The Silver-rated has seen its performance falter against peers more recently. While the fund’s five-year year-on-year returns are 7.43%, and 6.16% over three years, it is 21.49% down on the year to date.

Will says: "my investment in this fund has also taught me that perhaps it is not a good idea to be overexposed to one sector for too long. My portfolio lent on tech growth, so I am now trying to rebalance it slightly to a more rounded portfolio.”

Trust in Tesla

Wills investments are not all funds and ETFs though. He also has a holding in the electric car manufacturer Tesla (TSLA), formerly known as the world’s most valuable company. He says: "I am a huge believer in this company and have written a paper on how they work."

The NASDAQ-listed company is currently trading in 3-star territory, just slightly below its fair value estimate of $750. Morningstar’s analyst team has however noted that there is high uncertainty around future share price, but has awarded it a narrow economic moat.

Shares in Tesla have grown rapidly since over the past two years, rocketing from $95.63 at the start of 2020 to reach a peak of $1,222,09 in October 2021.

Will, who lives in the South-West of the UK, says he is hoping to stick to his current strategy for the next few years. "As a student I have relatively few outgoings, so my investment strategy won’t really be affected by higher inflation or any possible recession. However, I think real returns up to 2024 will be poor so I am not expecting much."

But Will concludes he is looking to invest on the hope of building a portfolio and ensure his money works harder for him, keeping pace with inflation.

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