The Amateur Investor: The widow butting up against a ‘terrible’ advice gap

After one reader, in her 70s, inherited a pool of money, she loved the process of getting into investing and had several early successes. But finding the right form of advice proved more difficult.

Sarah* had been expecting a legacy from a relative for some time and had a plan for what to do: she wanted to grow it into a bigger pool for her children and grandchildren, and wasn’t going to let a lack of investing experience stop her.    

‘We always said the money’s got to be invested because it’s such a good opportunity. It’s money that is a gift, really.’ 

The widow, who is in her 70s and used to run a small business with her husband, started looking at her options and talking to financial advisers. But she was surprised by the gulf between giving someone else control or going totally DIY, something heightened by the sense of responsibility she felt after her husband’s death several years before.

‘There is a terrible gap in the market,’ she says.

Sarah adds: ‘Most of them, all they wanted was for us to give them the money and it would just be put in these standard things... And you look at it once a year, and if it goes down, it goes down, and if it goes up, it goes up.

‘And we said to them, no. We want to have some input into it and know what is happening to this money. I’m not just going to put it in and forget about it.’

When the relative from whom they’d been expecting an inheritance died during the pandemic, Sarah and her family thought they should build up more investing experience ahead of time. She opened both a general account with Vanguard and Sipp with AJ Bell in the middle of last year, starting to read the financial pages more (and indeed Citywire).

‘I really enjoyed it and got on well with it,’ she says, adding that was probably helped by the fact everything seemed to be going up!

Successful early buys included US shares like semiconductor company AMD, which rose 80%, with many ideas gleaned by watching CNBC. On Vanguard’s platform, where only the passive giant’s funds are available, she mostly stuck with the popular LifeStrategy range.

At the same time, Sarah continued to shop around for the most appropriate form of advice before the bequest came through. With the support of family and close friends, she opened an account using the advisory service of a large UK wealth manager (which she asked not to be named). This allowed them control over ultimate investment decisions while making sure a helping hand was there when input was needed.

Despite being encouraged to put in the whole lump sum, she started to drip-feed the money in from last December. Even though she had initially pushed for more growth and tech exposure herself, when markets began to turn in the new year, she keenly felt the need to make the portfolio more defensive – a feeling not quite echoed by her adviser, whose emphasis was more on ‘buying the dip’.

‘If I go down 40%, it’s going to take me a hell of a long time to get back up to nothing and then start to get some profit,’ she says, contrasting that to her children with more years to play with.

Top positions in Sarah’s portfolio in May

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Holding Percentage of portfolio Bought
VT Argonaut Absolute Return 5% March
Ruffer Investment Company 5% Initial December portfolio
Dodge and Cox US Stock 4% Initial portfolio
Loomis Sayles US Equity 4% Initial portfolio
iShares Oil and Gas Exploration and Production ETF 4% February
Ashoka Indian Equity Trust 4% Initial portfolio
Ultico Emerging Markets Trust 4% March
Ecofin Global Utilities and Infrastructure 4% January
HICL Infrastructure 4% March
Waverton Multi Asset Income 4% Initial portfolio
JLEN Environmental Assets 4% February
Gore Street Energy Storage 4% Initial portfolio
Slater Growth 3% Initial portfolio
Jupiter Asian Income 3% January
iShares UK Dividend 3% February
Artemis Global Income 3% January
Marlborough European Special Situations 2% Initial December allocation
TwentyFour Select Monthly Income 2% January

Note: Larger position sizes only, rounded; does not include cash or individual shares.

Baillie Gifford’s Pacific Horizon (PHI ) was a case in point: the growth-focused investment trust, now down 25% year to date, started to suffer in the rotation towards value stocks. Sarah held off for a while but in the end resolved to sell out of that and similar funds, including the Baillie Gifford European Growth (BGEU ) and Smithson (SSON ) trusts. 

Commodities were an area which looked like a bolthole, especially after war began in Ukraine. She bought the iShares Oil & Gas Exploration & Production exchange-traded fund (ETF), trading under the ticker SPOG, though has since taken some profits on the WisdomTree Enhanced Commodity ETF (WCOG). The latter has surged more than 40% this year.

She also stuck with a position in Gore Street Energy Storage (GSF ), as well as snapping up JLEN Environmental Assets (JLEN ), which sells electricity generated by its renewables portfolio. That was partly down to an increasing interest in the green aspect, as well as going more defensive.

In the latter vein, the Argonaut Absolute Return fund (which has actually made money shorting green themes) is a recent buy and now one of the biggest holdings at about 5% of the portfolio. She has also ‘done really well’ sticking with the Ruffer Investment Company (RICA ), another big holding, while picking up several equity income funds, including Jupiter Asian Income .

Sarah knows she can’t pull everything out when it’s down but adds: ‘It’s these things that have really held me up.’

While saying she has a good relationship with the adviser, she feels the set-up is not really structured for those like her looking to take an active mindset. Other concerns include the lack of research provided on recommended funds. Although, any temptation to go fully DIY on an investment platform would also be a big decision and change from the original plan.

Sarah does laugh at a few mistakes made so far, saying she can be impulsive: most notable was buying South African miner Sibanye-Stillwater only for workers to go on the strike the next day.

But overall, she loves the process of doing research to having and acting on an investment idea. Taylor Maritime (TMI ) was one such buy after reading an article on shipping, before a sale as freight showed signs of normalising post-pandemic. ‘Since then it’s gone really well again and I think, oh drat.’

*Some readers do not wish to use their real name.

‘The Amateur Investor’ (initially called ‘My portfolio’) is a new series on Citywire Funds and Investment Trust Insider, speaking to our readers and individual private investors.

If you’re interested in speaking to us, being the subject of an article or have any questions, please email jgordon@citywire.co.uk and use the subject line ‘My portfolio’.

 

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