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Dear Victoria,
My wife, 67, and myself, 72, are both retired and fortunate to own our own home, and have sufficient income and savings with no debts, which make it inconceivable we would ever need to access our Sipp portfolios.
Their benefit to us lies completely in leaving them for our two children, who are both in their late 30s, to access after our death, given the implications on inheritance tax and their relatively poor current pension arrangements.
In an effort to grow the balances for their long-term futures, we are open to taking more risk than we might otherwise.
The funds involved have all been handpicked by me but, with one or two rare exceptions, my decisions have been ruled by past records, rather than current performance. They have been left in the funds ad infinitum with little or no review by myself.
The funds and rounded up current values are as follows:
Many thanks,
Mike
Victoria says:
That’s extremely kind and selfless of you both to hand your Sipps down entirely to your children rather than using them to fund your own retirement. There’s lots of research out there to suggest that younger people aren’t saving enough into their pension pots, so your children are very lucky to have this financial support.
At Interactive Investor, we believe that investing is for the long term and that it’s best to avoid frequently hopping in and out of the markets, as getting the timings right can be pretty tough, and fees can add up and erode performance, too.
However, you seem to have gone too far the other way – leaving your funds “ad infinitum with little or no review” is a red flag for me.
It’s important not to just “buy and forget”, because failing to rebalance your portfolio can steer you away from your financial objectives and can leave you exposed to too much risk. If one or two of your funds are suffering heavily for example, they’ll end up dragging on your overall performance.
On that note, I’d say it’s important to review every fund you hold regularly and make sure you are still happy with how they invest, what they are investing in, and their performances.
One that stands out like a sore thumb is M&G Recovery, which I believe should be reviewed.
Around a decade ago, this fund had a big following with roughly £8bn of assets at its peak. It was managed by Tom Dobell, who was considered a “star” fund manager at the time.
But he has since lost his Midas touch, with the fund consistently underperforming – and Dobell ultimately departed in 2020. Since then, the fund has continued to struggle versus rivals, so perhaps that’s one to let go of.
Digging further into your portfolio, it is good to see you have a nice mix of passive and actively managed funds, as well as strong geographical diversification with exposure to Europe, America, and Asia.
I notice your exposure to the UK is low, perhaps for good reason given its underperformance versus the US and other European countries in recent years. But the British market is looking cheap now and is arguably worth closer inspection in an attempt to “buy low”.
One active fund option on Interactive Investors’ Super 60 recommended funds list is Fidelity Special Values. It is managed by Alex Wright, a value investor who looks for unloved companies across various sectors where he believes there are opportunities not yet recognised by the market with upside potential.
He tends to favour small-to-mid cap stocks, and since you’re willing to invest away from just large-caps, demonstrated by your holding on Artemis US Smaller Companies, I thought this might be a good option for you.
Since you’re aiming for long-term growth, you could think about upping your exposure to the US, particularly the tech sector, which has been a fantastic source of growth for investors in recent years.
Take a look at Sanlam Global Artificial Intelligence, an active fund costing 0.5pc which aims to pick winners from the AI revolution. Another one to look at is the Legal & General Global Technology Index Trust, which has been a top quartile tech fund performer over one, three and five years.
There’s no denying there’s been somewhat of an AI frenzy this year, and valuations are looking expensive. But if you believe that technology and AI will continue to grow long term, like I do, then it shouldn’t be too late to get involved.
Or you could keep this idea in your back pocket for next time there’s a sell-off and then load up!
Good luck with your investment journey.
‘We’ll never run out of money – so we’re giving our pensions straight to our kids’
Rate My Portfolio: Victoria Scholar gives her expert opinion on a reader’s investments