We’re pleased to introduce Malcolm from Edinburgh who will share his experience as someone in retirement properly taking charge of their investments for the first time. Discover how he set up his first portfolio and in future articles Malcolm will explain how he is managing his investments.

Malcolm from Edinburgh says:

As retirement beckons there is a need to get financial matters in order and what follows is a narrative account of my attempt to become more responsible in managing the self-invested part of my pension. No recommendations or advice are offered; merely a snapshot of experience.

By way of context, I invested during the middle years of my career in a free standing additional voluntary contribution (AVC) scheme. I paid little attention to this investment and was misguided enough to believe that retirement at 52 (rather than 63) was realistic.

I then compounded matters by not continuing to invest in the pension in my later working life. Despite this lax approach, the invested sum increased six-fold and totalled around £150,000 by retirement.

I had 95% of the invested AVC in the same fund – a riskier situation than necessary, so I entered retirement determined to do better and where possible enjoy investing.

I opened a SIPP (self-invested personal pension) with the £150,000 and created a stocks and shares ISA account to which £40,000 has been added over the last two years.

PUTTING A PLAN INTO ACTION

By mid-December 2019, I was at the starting line. I had no set goals in mind – I just wanted to gain satisfaction from knowing that something more certain than luck was informing investment decisions.

At the outset, I decided to retain a quarter of the joint SIPP/ISA money in cash savings to ensure shares could be purchased or money withdrawn without raising funds through selling.

Next, I invested £40,000 split equally across two equity investment funds, one more cautious and one more adventurous. These moves were designed to provide some stability to my portfolio.

The remaining half of the fund is currently invested in 22 different shares, all from the FTSE 100 and FTSE 250 indices. The minimum investment is £4,000, the majority at £5,000 and a few at £6,000 to £8,000.

I’ve tried to take a conservative approach based on investment clusters in certain sectors, most notably health and pharmaceuticals (including AstraZeneca (AZN), Hikma Pharmaceuticals (HIK) and Smith & Nephew (SN.)); construction (including Barratt Developments (BDEV) and Balfour Beatty (BBY)); food and drink (including Associated British Foods (ABF) and Tate & Lyle (TATE)); and natural resources (BP (BP.) and Royal Dutch Shell (RDSB)).

BUYING BEFORE THE MARKET CRASHED

Most shares were bought in the window after the UK general election in mid-December 2019 and before the full extent of Covid-19 became known in late February 2020.

Timing is important in the financial world and clearly this was unfortunate timing. So, as of 22 July 2020, I am just over 9% down, equivalent to a loss of £13,500.

This is a little disappointing but something I’m sanguine about especially as I have recently sold eight shares at a profit of £7,000.

I do not follow the maxim that shares necessarily need to be held for the longer term. My greatest pleasure thus far has come from identifying previously unknown to me FTSE 250 companies, such as UDG Healthcare (UDG) and Essentra (ESNT) and investing successfully in them.

I mostly use visual information rather than language description to comprehend matters. For example, considering the term ‘overweight’ as a wealth enhancing possibility rather than as a health-related concern seems complicated relative to reviewing the shape and profile of share price charts over a week, a month, three months and onwards up to 10 years.

I also find the objectiveness of the price-to-earnings ratio useful when determining whether a stock is overvalued or undervalued.

I usually avoid stocks showing marked price swings (up and down) as well as share tips. Instead, I listen to financial podcasts as these can help considerably in gaining a broader business understanding.

THREE STYLES

Going forward, I need to manage three types of shares: ‘succeeding’ ones which are in profit or close to profit and deciding whether to invest further in these shares or to hold or sell them.

Then there are the generally ‘sound’ shares which have fallen in line with Covid-19 impact and which are between 5% and 20% down. These shares need scrutiny in terms of improvement or otherwise and will probably be held for the present.

Finally, there are my five ‘sink’ shares which are between 25% to 45% down since purchase. Most likely, I will hold these shares for some years. I have yet to sell a loss-making share, but this is something meriting review in the future.

There are many other challenges such as exploring whether investing in the AIM market and buying shares in other global markets is a good idea. I hope to report on these in a future column.

Until then, the intention is to keep learning and to become more responsible in making investment decisions which do not unduly compromise the enjoyment of everyday life.

DISCLAIMER: The views in this article are those of the author and not of Shares or AJ Bell, the owner of Shares. Readers should consult a suitably qualified financial adviser if they are unsure about managing their own investments.

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