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We are fortunate at Stockopedia to have a community of successful investors who have built portfolios worth more than £1m in their ISAs and kindly agreed to share their insights. In this series of articles we will explore their investment strategies and key lessons learned on how to pick stocks and manage risk when building a portfolio. Whether you are an experienced investor or just starting out, we hope that these interviews will provide valuable insights and inspire you to achieve your own investment goals.
Name: Mark
Job: Retired (formerly corporate banking)
Number of years as a private investor: “Best part of 40 years”
Portfolio Size: Over £1m
Investing Background: Mark started building his portfolio with investment trusts when he was in his early 30s. He continued to build his portfolio throughout his career in corporate banking and became a full time investor when he took early retirement. His portfolio now has about 75 holdings which he monitors daily.
Investing Goals: Enjoy it.
Mark started investing when he was in his early 30s while working in corporate finance in London. “In the early days it was very much safety first,” he says, “as I couldn’t afford to lose any money.”
With the relatively modest sums available, Mark established an investment routine by setting up a direct debit. “I was putting money in every month into big-name Investment Trusts (such as Allianz) as I hoped they would be reliable,” he says.
Before long, Mark started branching out to slightly higher risk investment trusts, such as Pantheon Ventures (a private equity specialist) and a fund which invested in emerging markets. Mark recalls that he would invest £50 a month into each of the trusts in his portfolio and “if I happened to have a lump sum I would put that in too.” Roughly four decades later, he still holds some of those investment trusts but “unfortunately they are not in a wrapper.”
In 1986, the Personal Equity Plans (PEPs) were introduced in the UK which could be used to shelter investments from capital gains tax (much like the ISAs which replaced them in 1999). “When PEPs came along I put them [my shares] into a wrapper,” says Mark. “Eventually I moved to Hargreaves Lansdown, whose platform I liked then and liked now - despite the costs. I also now have an interactive investor platform, so I have spread my ISA between the two.”
Insight 1: Get started early, invest regularly in reliable assets and use a tax wrapper
By the time Mark was in his later 30s and making more money, he could afford to take a few more risks with his portfolio. “In my later 30s, I got a bit more adventurous and put small amounts of money in the odd mine.” Looking back Mark admits that his attitude towards investing at this stage was higher risk. “In retrospect I did a bit more of what I would call gambling,” he says.
He didn’t do much of his own research, but got ideas from tipsheets and magazines. “We’d chat around the office,” he recalls. “We knew we weren’t doing the research. We were talking about the flash stuff.” “Did I lose or make very much money?” he ponders, “neither.”
Insight 2: Speculative assets don’t provide reliable returns
“I guess I really started dealing in individual equities in any real amount 15-20 years ago,” Mark recalls. In his 60s, he took early retirement and started spending more time researching individual stocks to add to his portfolio.
Time spent researching varied by stock. “If it was a FTSE 100 company, I probably knew a fair amount about it anyway and I would probably spend about an hour researching myself.” But smaller companies have been the heart of his portfolio and for these Mark always tries to do the same thing: “I have always been really keen to meet the players - there have been times when I thought no way I wouldn’t touch it [a stock] - a lot of the time it was when I didn’t like the management.”
More broadly, Mark subscribes to several publications, is a member of ShareSoc and tries to attend the Mello private investor events. “I think anything that widens one's sphere of knowledge is pretty good,” he says. “I do enjoy the people side of this. If I don’t like the people, I don’t invest.”
Insight 3: Scrutinise the management of prospective investments
Overall, Mark’s attitude is to hunt for shares to buy and hold for the medium to long term. “If they start doing really very well I will hold on,” he says, referring to stocks like 4imprint and Somero which have multi-bagged since he bought them. “Some I have held for 10-15 years and when I have done short term trades it was because I was impatient.”
But on the other side of the coin is a common investor challenge: attachment to stocks. “It’s very hard not to [get attached to shares]”, says Mark. But “one thing I have learned is to cut my losses.” Mark doesn’t have any hard and fast systems in place for managing losses, but he compares the state of any underperforming company in his portfolio to its profile when he bought it. “I don’t use stop losses,” he says, “it’s more the feeling that it’s now time to get out. I get concerned if it [a single stock] has lost more than 25%. But I’ll look closely [before selling]. If the company starts coming in with profit warnings or lukewarm reports [I will sell].”
Insight 4: Curb your impatience and hold onto the winners, but cut your losses when things aren’t going as you expect
Today Mark manages a portfolio of about 75 holdings, which includes VCTs and Investment Trusts - assets he has started to get back into in the last few years. “I’m looking at diversifying more and I’m looking to diversify in the US or Far East,” he says, “I haven’t got the time or the inclination to go and research companies there, so I’m looking for good quality investment trusts.” Overall, Mark’s attitude to international investments is to leave it to third-party professionals: “You’ve got the dealing costs on overseas shares and it’s harder to find the information.”
Mark assesses his overall portfolio about once a week, but checks up on the performance of the individual small cap holdings every day. “When I was doing a stressful job, I was leaving home at 7 and getting home at 8, I didn’t have much time during the day to check my portfolio. Now it’s enjoyable.”
Enjoying his investing has contributed to a change in attitude. “My tolerance to risk has changed,” he says. “Now I have time and more money and I am enjoying it - enjoying it is a big part of investing for me.”
Insight 5: Enjoy it!
About Megan Boxall
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Thanks for the article, that is the best advice 'enjoy it'. Enjoy investing, and enjoy spending it!
My experience is not so different to Mark's. In the early days I invested in unit trusts. My first individual share was BT when it was privatised in December 1984. Around this time Foreign & Colonial launched the first investment trust savings plan. In February 1985 I started a plan with a modest monthly sum, later increased. I still have this holding now worth around £90k for an investment of less than £7k. The power of compounding over a long period. My current portfolio is roughly 25% individual shares and 75% investment trusts.
Personally, I go for ITs for assets that are otherwise difficult to invest in e.g. illiquid infra, private equity and also overseas equities where just the FX costs alone can offset the manager fees. Usually prefer individual equities in UK market - especially micro and mid-caps - because UK stocks easily accessible to UK investors and relatively easy to research with help of tools like Stockopedia. Finally, I do use open ended funds for fixed income as don't want any leverage there and daily price movements not such an issue. Broadly happy with the approach.
*Past performance is no indicator of future performance. Performance returns are based on hypothetical scenarios and do not represent an actual investment.
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Great article. Lots of sound advice