Investor Views: ‘Can Funds Beat My Property Portfolio?’


Jason Redfern is hoping that his property investments will help fund his retirement, as he did not have the opportunity to save into a pension earlier on his career.

Jason, who is 56 and runs his own marketing consultancy, says: “I think I am part of that generation that missed out on final salary pensions. I started off working in publishing and we didn’t really have access to a company pension.

“I think you had to work for the company for at least a year before you qualified for the staff pension – which I don’t think was particularly attractive anyway.

“When I started my career I moved jobs a few times so didn’t really have the opportunity to build up any significant savings.”

It was only after getting married and having children in his early 40s that Jason started to think more seriously about his longer-term financial security. “I was earning more so was able to start savings into an ISA. But alongside this I have also looked at property investments.”

The price of the property owned by Jason and his wife own in London has increased significantly over the past couple of decades, helping to finance further investments. “This seemed like a better bet. We remortgaged our home to help finance the deposit for a mortgage on a buy-to-let flat.”

This has proven to be a good investment. “The rent received more than covers the interest on the loan and we have also seen the property increase in value too over the past eight years.”

Lake Placid

They then bought another property, financed in a similar manner, in the Lake District. “We rent this out as a holiday let, but also get the opportunity to use it when it is unoccupied. It has been a good financial investment that we have also really benefited from as a family.”

Alongside these two buy-to-let properties, Jason also invests in an ISA. “I have realized that I need to diversify a little. Property has been a good investment for me, but it’s hard to access this money if you need it at short-notice.

“I also think I am very over-exposed to one sector. If house prices crashed I’d lose a lot of money, so I’ve started to invest into an ISA, and have also put more into a pension I set up through my company.”

Jason and his wife have opened ISAs in the past five years. Initially they did not put much in, but he has saved more since 2020.

“We managed to save some money during the pandemic as we weren’t paying commuting costs, or holidays, or meals out. We’ve used this to put a little more into these savings plans.

“The Lake District property has also been extremely busy for the last two summers as people have been reluctant to go abroad with restrictions changing all the time, so we have tried to invest the extra money we’ve made from this, rather than not just spending it.”

Growth and Tech

For investments, Jason has looked towards global funds. He is also keen on tech companies because of the potential for future growth.

Currently within his ISA his main fund holding is in the Gold-rated Fundsmith Equity, which has been his best performing fund. According to Morningstar, this has delivered annualized returns of 12.7% over the past five years.

This is a global fund, investing in large and mega-cap companies. The investment philosophy is to buy and hold high-quality businesses that will continually compound in value. The fund manager, Terry Smith, who launched the investment house Fundsmith LLP in 2010, said the fund aims to be a long-term investor in these chosen stocks. Smith believes this long-term approach is a better way of delivering value for investors.

Morningstar points out that the Smith’s success in doing this has created some potential issues, with the fund ballooning in size. The fund stood at £38bn at the end of January 2022. However, Morningstar analysts say that despite this size, Smith’s approach means that there is still ability to add value and the portfolio remains suitably liquid.

More recently, Jason has also invested in the investment trust Polar Capital Technology Trust (PCT) which has a 5-star rating from Morningstar. Jason says: “I know a lot of companies like Facebook and Amazon are huge now, but this gives me exposure to some of the smaller companies which hopefully will grow to that size. There is a lot of work going on in AI (artificial intelligence) which seems like an interesting investment opportunity.”

Elsewhere, Jason also has investments in Stewart Investors Asia Pacific Leaders Sustainability, which has a Morningstar Analyst Rating of Silver for some share classes and Gold for others.

The fund, which has delivered annualized returns of 9.94% over the past five years (and 9.28% over a 10-year period) remains “an excellent choice for investors” looking to invest in this region, according to Morningstar analysts.

Jason says: “Hopefully over the next 10 years I can add to these investments, so this will provide a bit of cushion for when I eventually start to think about retiring, or perhaps just working on a more part-time basis.

“I am hoping that these investments, with my properties, will provide some security for us as we eventually start to wind down. But I run my own business and am not planning to retire anytime soon.”


www.morningstar.co.uk

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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