After a career spanning more than 30 years in financial services, Nicholas has seen plenty of ups and downs in markets and had his fair share of winners and losers, but he understood early on the importance of staying invested through the cycle rather than trying to time the peaks and troughs.

In his first job in the probate office of a large UK bank, he was struck straight away at how well a small, regular investment plan had served the firm’s customers and vowed to ‘squirrel money away on the basis that it would keep compounding’.

He also had the odd flutter, but after a couple of heavy losses he decided to dial down his risk and spread his money across the market through funds and investment trusts and leave it there to accumulate.

‘I used to dabble in individual stocks and had built a sizeable portfolio, but I got my fingers burnt once too often,’ he relates.

‘I quickly lost money investing in JJB Sports and I also doubled down in the banking crisis and lost my entire investment in Bradford & Bingley and other stocks. After that I stuck religiously to funds, enjoying their broader investment reach and security.’

A CONFIDENT INVESTOR

While Nicholas hadn’t intended to retire early – he wryly recounts how he was ‘downsized’ over Zoom during the pandemic and a courier was sent to collect his work mobile and security pass – he doesn’t miss the daily commute and having lived off his redundancy payment for the last couple of years he is now ‘commencing drawdown and working out how best to access my money’.

‘I worked in financial services and with pension products so I’m happy to manage my own investments,’ says Nicholas, adding ‘besides, I have an aversion to advisers and their charges, and their guesses are probably no better than mine.’

With a sizeable SIPP (self-invested personal pension) and stock and share ISAs, he has a substantial retirement pot.

‘I’ve always been rather suspicious of governments and their tendency to tinker with pensions, so for many years I maxed out my ISA contributions.

‘I like stock and share ISAs because they are so simple to understand and largely get left alone by the chancellor and lobby groups, whereas it always feels that pensions are under threat.

‘My ISAs give me a broader spread of tax wrappers and has meant I’ve accumulated sizeable funds.’

His long-term SIPP holdings provide a spread of investments, with the UK taken care of through the Vanguard FTSE UK All Share Index Unit Trust (B3X7QG6) and the SPDR S&P UK Dividend Aristocrats ETF (UKDV).

Non-UK exposure is provided through Barings German Growth Trust (B9M3QX4), HSBC Japan Index Fund (B80QGN8) and First Sentier Global Listed Infrastructure (B24HJL4).

Nicholas uses his stocks and shares ISAs, bought through AJ Bell, ‘to have a bit more fun, trading a bit more and chasing a few ideas and themes like energy, green stocks, real estate and infrastructure, whereas I stay rather more basic with the bulk of my other money’.

He has little time for the traditional approach to investing in retirement, which is to stay low-risk and just own bonds for income instead of having fun and betting on long-term outcomes.

‘Stocks will always outperform property, bonds, cash and other assets – it’s important not to over-analyse these things,’ he believes.

‘My AJ Bell funds may well be the last money I access so it’s important to remember that some or much of it will be invested for many years, hence I’m willing to play the long game.’

BIG DECISIONS

However, Nicholas is conscious that now his investments have reached an optimum size and he’s about to start decumulating, the investment decisions he makes today are big ones.

‘A decade ago, I might have been sweating on how best to spread my £20,000 ISA investment every April. Should I put £5,000 each into four funds or £4,000 each into five funds. Now if I decide to shift 5% of my portfolio into X or Y, that’s a £75,000 bet!’

The other big decision facing him is how much money to draw down, essentially trying to pre-plan how long he might live and what his long-term needs might be.

‘No-one has a crystal ball, but I am influenced by my early work experience at a bank in wills and probates where every day I saw people who had died in their 70s and 80s and seemed to be living fairly modest lifestyles but who had really large unspent investment portfolios and were just living off the dividends.

‘I don’t intend to die later in life with loads of money that I could have enjoyed. It’s also clear that I need more money in the earlier period of retirement than I will need in the later stages, say post age-75.

‘The whole idea of an annuity paying a flat amount for life seems daft to me. It requires an odd sort of discipline, to force yourself to spend and enjoy money today when that little voice in your head keep saying “but what if it runs out?”.’

DISCLAIMER: Please note, we do not provide financial advice in case study articles, and we are unable to comment on the suitability of the subject’s investments. Individuals who are unsure about the suitability of investments should consult a suitably qualified financial adviser. Past performance is not a guide to future performance and some investments need to be held for the long term. Tax treatment depends on your individual circumstances and rules may change. ISA and pension rules apply. Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Ian Conway) and the editor (Tom Sieber) own shares in AJ Bell.

‹ Previous2023-09-14Next ›