Saving & Investing

Where Are We Invested?

Where are we invested
Written by Richard Thwaite

Our investment landscape

When I read other financial blogs one of the things that I find interesting is how that person has invested their money and where, therefore I thought it might be helpful if I do the same so listed below are the “hills and valleys” of our investment landscape.

Over the years I have tried quite a few investing styles and early on I was purely after high growth, however, more recently I have scaled back on this and now have a more balanced approach. Throughout a large part of our investment journey, “Trackers” have played an important role in our investment strategy. Outside of our pensions, all of our shares, funds etc. are invested within mine and my wife’s ISA wrappers.

Our total ISA allocation is broken down as follows

Our ISA allocation

Tracker Funds

Trackers are the centrepiece of our ISA investment portfolio. These are a diversified range of trackers covering the global markets. They are mainly from L&G, Vanguard and Blackrock due to their low charges. Since Vanguard Lifestrategy came onto the scene a few years ago any new money that we allocate to the Tracker funds goes into the Lifestrategy 80:20.

Dividend Stocks

I had been investing in dividend paying stocks for quite some time, however, I saw the dividends as a nice bonus and it was the growth that I was interested in. It is only really in the past few years that I became interested in dividend growth stocks for the income they produce. I hold quite a few of the dividend stalwarts such as Imperial Brand, National Grid, BHP & Vodafone as well as others such as Brown N Group, Paypoint, Restaurant Group & XP Power.

Momentum Trackers

This strategy consists of 8 tracker funds spread across all the key geographic asset classes plus bonds, commodities and gold. Each month I sell the previous months allocation and buy the new top 4. The allocation is not equal weight but determined by covariance (measure of the strength of the correlation between two or more sets of random variates). I have been using this strategy for 4 years and it performs very well. In a bull market (rising) it tends to fall behind the main indexes, however, where it really comes into play is in a bear (falling) market or periods of correction. At these times it gets you heavily into bonds and gold which usually cushion the falls.

I started this strategy with a specific sum of money and have not added anymore over the years. It has now grown to make up 17.29% of my overall ISA allocation.

Small Cap Stocks

These are the remnants from my growth chasing days. They still however, are a very important part of our overall strategy and will remain so for the foreseeable future. Doing the research on new stocks as well as maintaining the current ones is very time consuming which means I keep this to 5-6 shares at any one time. Some of the shares we hold are Conviviality, Supergroup and Majestic Wines. If you look at the charts for any of these you will see it is a roller coaster of a ride, however, the rewards can be high.

Funds

We still hold onto an Artemis Global Income fund that has served us well over the years. However, our main reason for holding funds is the ease in which I can diversify into areas such as India, Africa, Brazil etc. These are markets with great potential for growth and are worth considering. I keep the percentages invested in these individual funds low. These tend to be shorter term holds and I feel more comfortable holding these in funds as opposed to ETF’s.

The whole picture

Although our ISA allocations are incredibly important they are not the whole picture. The chart below shows all our investment areas.

The whole investment picture

Property

When I talk about property I am referring to rental property and property investments. It does not include our main house where we live. Although our main home can be looked at as an investment, its primary function is a place for us to live. As we will always need somewhere to live I never consider our home in any financial calculations, although at some point in the future we could always downscale to release some capital. I look at this as a potential bonus and not something to rely on.

Pensions

This is the backbone of our investment strategy. We have both paid the maximum into our respective pensions throughout our working lives to get the maximum employer matches. We both have defined benefit (final salary) pensions which were stopped a few years ago and now both have defined contribution pensions.

Between us we have 7 pensions. We have looked at combining some of them but have decided to leave them as they are. They are conservatively invested largely in global trackers with a 60:40 equity bond split.

If you currently don’t take advantage of your option to maximise your pension contributions then I would seriously suggest that you may want to reconsider, as you are leaving free money on the table.

Overview

When I look at our asset allocations, I look at the whole picture and take into account our pensions and property. As our pensions are our largest investment and have a 40% allocation to bonds our ISA’s are largely invested in equities, although our momentum trackers have had us heavily in bonds and gold for most of 2016 with a recent shift to equities as the markets begin to climb.

What I really like about our pensions is that the majority of the money paid in has been from our employers and the taxman. It really is money for nothing. The obvious downside is you are restricted to getting your hands on it until you are 55 (and rising). This is where the ISA comes in as it will bridge the gap should we decide to finish work early.

Our main incomes are from our respective jobs, rental property and dividends (dividends are left in the ISA and reinvested). Our priority after maxing out our pension match is to max out each ISA, whatever is left is what we live on.

I am not suggesting what we are doing is perfect but it’s working for us. We feel we have a balance that is right for us and are comfortable with it. I am sure we could improve in some areas and would welcome any comments or suggestions.

Please be aware that I am not recommending any of the above investments to you, I just wanted to give you a brief summary of my thoughts around investing in the hope that it might be useful.

Leave a Comment

2 Comments

  • Hi Richard,

    It’s very interesting to see your breakdown of investments. Until recently the only investments I had were in my pension (which used to be 3 separate ones, more recently combined into 1). I’ve just managed to max out an ISA for the first time last tax year which I feel really great about, and now I’m looking forward to working toward maxing out future ISA’s. My next job is working out who to take the ISA’s out with and how to invest within the ISA wrapper! So it’s good to see your strategy for splitting investments.

    I’m interested to know, when you invest, do you follow the split strategy every time you invest (i.e. x percent into trackers, x percent into dividend stocks etc), or do you say invest in just one type of investment one month, then another type the next month to even things out and so on?

    OR

    • Hello OR

      The split in our investments that I have shown can be seen as a general overview. Within each category, i.e “Dividend Growth Stocks” there are 39 individual shares that are chosen for a number of reasons such as their sector (financial, transport etc). Whether they are cyclical or defensive. Where in the world they sell too. I will cover how I chose these in more detail in a forthcoming post.

      How we allocate our money to each of the 5 areas is actually quite simple. We currently have two active ISA’s (ones we can pay into). I am with HL and my wife with iWeb. We take the annual subscription we are allowed to make, divide by twelve and that is the monthly payment we make to each ISA. The iWeb ISA only holds the Vanguard Lifestrategy 80-20 therefore that is where the full monthly allocation goes for iWeb. We don’t try and time the market or wait for corrections. We simply buy it at the price it is on the last working day of the month (pay day) every month.

      95% of the time the HL allocation buys dividend growth stocks, I use HL’s monthly plan where you can buy a company on the 10th of the month for a trading fee of £1.50 plus stamp duty. The choice of which company to buy comes down to a few things but most importantly the stock must be good value. I have a spreadsheet where I calculate the fair value price each month which usually results in only a handful of candidates. From these few I typically chose 3 and distribute the £1,270 monthly allocation across all 3 equally.

      I must add that my monthly HL allocation is used to top up existing stocks we have. I am at a point where I have 39 individual shares which is far too many to keep a proper eye on. I have started a process of reducing this number over the coming months.

      Individual shares are a lot of work (at least they are for me) but I enjoy the process. That being said if I was starting out or had to make a choice of only investing into one area. The choice would be very easy. A Vanguard Lifestrategy would win every time.

      Good luck with your own investing journey.

      Richard