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Anoop Rattan, a 54-year-old from London who works in financial services, took control of his investments in 2014, switching £78,000 from workplace schemes into a self-invested personal pension. He has since grown his Sipp into £127,000, achieving an annual return of around 7pc, thanks in part to following The Telegraph’s Questor tips column.
However, Mr Rattan still feels that his pension could be improved. “My portfolio is missing American technology stocks and funds – but I am particularly nervous about a crash, so I’ve avoided those companies,” he said. Mr Rattan admitted this stance had detracted from his Sipp’s performance but said he wanted to avoid doubling up with his various other company pension schemes which hold US tech shares.
He is also conscious that his portfolio is lacking in gold and renewable-energy funds, or those backing hot investment themes, such as robotics and cybersecurity. But with a finely tuned portfolio of 24 shares and funds, how should he redeploy his savings?
Rob Morgan, investment analyst at Charles Stanley, said:
I like the basic construction of Mr Rattan’s current portfolio as no single investment dominates and he has the right number of holdings to offer diversification but still be manageable.
If I have a criticism, it is that the portfolio is lacking in mainstream funds, even if Mr Rattan’s workplace pensions are invested in these.
British smaller-company funds occupy a particularly large part of the portfolio, at around a quarter of his investments. I am enthusiastic about their prospects, but holding five funds which invest in them is slightly excessive. I would look to consolidate this part of the portfolio – perhaps selling Chelverton UK Dividend, as the trust is quite small – and redeploy the proceeds elsewhere.
Adding gold would help to diversify the portfolio and an exchange-traded fund such as iShares Physical Gold, which owns bars of the precious metal and charges 0.15pc, would be the best option. If rising inflation takes hold, the gold price should rally.
Renewable-energy investments would also be a sensible addition. The Renewables Infrastructure Group, an investment trust, is the best option as it backs a broad collection of sustainable-energy projects. Its shares yield 5.2pc so it would be a useful investment to hold once Mr Rattan has retired and is drawing an income from his Sipp.
I would hesitate to add funds investing in robotics and cybersecurity to the portfolio, as shares in these companies tend to be heavily influenced by investor sentiment. A fund investing more broadly in technology stocks, such as Allianz Technology Trust, would be a better bet.
Moira O’Neill, head of personal finance at Interactive Investor, said:
Mr Rattan has invested an average of £5,000 in each of the funds in his portfolio. If he keeps doing this there’s a danger he will end up with a large number of funds, each representing only a small portion of his portfolio. It could resemble an expensive “tracker” fund – performing not much differently from the stock market – and become unwieldy and difficult to monitor.
Mr Rattan appears to be an investment trust fan, so I suggest that he pick one which invests across global stock markets as the core of his portfolio, allocating 40pc of his Sipp to it. The F&C Investment Trust would be a good option, or as a low-cost alternative he could buy the Vanguard LifeStrategy 60pc Equity tracker fund, which charges 0.22pc.
A smaller number of “satellite” funds held alongside this would then be easier to research and monitor.
Mr Rattan should reduce the number of British smaller-company funds he holds. Historically these investment trusts have done well and may continue to do so, but their shares aren’t particularly cheap at the moment. They could fall to bigger discounts to the value of their assets, which would be a good time to buy back into them again.
The Capital Gearing Trust would be another useful addition. It’s a defensive investment trust, which would help to cushion the impact of any stock market falls on the portfolio. A large portion of the trust is invested in inflation-linked government bonds, so it would also offer protection against rises in the cost of living.
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