Finding tomorrow’s winning investments is easier said than done, but Tom Williams, 38, from Brighton, has had a good crack at it.
With over a decade before he needs to call on his Isa, worth around £150,000, he has invested heavily in the hottest trends in markets, from technology stocks to biotechnology, renewable energy and even cryptocurrency.
He also holds £50,000 in Premium Bonds ready to deploy if there is a market crash.
“I’m comfortable with taking a lot of risk with my portfolio as I know I don’t need to use the money any time soon. My rough plan is to help my daughter get on the housing ladder in around a decade,” he said.
There are two aspects of his portfolio he wants professional help with. The first is cryptocurrency, in which he has invested £20,000. Half of that is in the biggest coins, such as Bitcoin and Ethereum, and the rest in lesser-known “alt-coins” which could take off – or crash.
“I want to add another £30,000 to crypto. I think it is a store of value and will go up in the long run. Some of my alt-coins may go to zero but I am ready to take that risk,” he said.
Second, he is unsure whether to buy Scottish Mortgage, Britain’s largest investment trust, known for its bold bets on tech stocks.
“I’ve read a lot about it – should I buy it even though the manager, James Anderson, is leaving next year?” asked Mr Williams, who works in finance.
Oliver Murray, partner at Smith & Williamson, said:
With a goal of paying for a house deposit for his daughter in more than 10 years’ time, Mr Williams can take a fair amount of risk with his Isa – and he is, but there are some easy improvements he can make.
Let’s start with the Vanguard LifeStrategy 100pc Equity fund, which owns thousands of stocks from around the world via 10 funds. It charges 0.22pc, but Mr Williams could more than halve his fees by buying the funds directly.
The Vanguard FTSE UK All-Share Index and S&P 500 tracker funds , which own British and American stocks, charge just 0.06pc and 0.07pc in fees.
He also has too much cash in Premium Bonds. His £50,000 is a lot assuming Mr Williams is in a stable job and has no immediate requirement for this money. Most of it will be better off invested as the chances of his Premium Bonds keeping up with inflation over 10 years is minimal. They have an implied interest rate of 1pc, but that does not mean he will win.
Regarding his cryptocurrency investments and desire to add another £30,000, he should only invest what he can afford to lose. Mr Williams also has to be aware that digital coins can swing violently in value and never forget that it is unregulated industry that could suddenly face a threat from governments.
Everything he reads about cryptocurrency was likely written by someone with a vested interest, so he has got to be very careful.
Mike Deverell, partner and investment manager at Equilibrium, said:
Almost all of Mr Williams’ funds are invested in stocks, which means his portfolio is high risk. Given he doesn’t need to touch the funds for the next 10 years, this may be appropriate, but he should make sure he reduces risk as he approaches the withdrawal date.
I’m a fan of the Foresight UK Infrastructure fund he holds, which is an exception, but he could diversify further by buying Segro, a real estate investment trust which owns distribution warehouses that are benefiting from the shift to online shopping.
Should he buy Scottish Mortgage too? It’s a great fund and a good way to own sectors he likes such as technology and clean energy. I wouldn’t worry about James Anderson leaving given Baillie Gifford’s team approach to investment management.
However, I would not hold this alongside Baillie Gifford Global Alpha Growth as there is a lot of crossover between the two. I’m not a fan of cryptocurrencies as most are purely speculative with no inherent value.
He might get lucky and do well, but in some ways they act like big Ponzi schemes – the original holders benefit massively from newer purchasers driving up the price. At some point, central banks will launch their own cryptocurrencies backed with actual assets, and then many digital coins will be worthless.
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