‘I’m 81 and own just 10 stocks – is this too risky?’

An adventurous investor in their 80s is a rare sight – particularly one who started investing only a couple of years ago and invested everything in only a handful of stocks.

But pensioner Derek Fraser, from Leeds, is one of them. With a comfortable pension to fund his lifestyle, he began adding a few hundred pounds a year into five shares. Last year he raised the stakes and invested the full £20,000 Isa allowance in buying four more shares and one investment trust.

He now has £ 37,000 invested and hopes to grow it as much as possible to pass on to his children and grandchildren.

“I know the conventional wisdom is to use funds, but I like picking stocks. I want to grow my savings as much as possible for five years and have made 24pc so far this year. I review my stocks once a year and want some expert guidance,” he said.

Mr Fraser bought airline stocks in IAG, which owns British Airways, and Jet2, this year when he decided that the pandemic was coming to an end and travel would resume. However, he is worried about the impact of the omicron strain.

He also owns Lloyds and Rotork, an industrial equipment manufacturer. “Lloyds is one to hold forever. Shares are flat from where I bought them but Rotork has doubled in value and is now my largest position,” said Mr Fraser.

David Miller Investment director at Quilter Cheviot

Mr Fraser’s portfolio is too risky given he’s investing only for five years. Only owning shares is more suitable for someone with more than seven years to invest. For less than five years, only half the portfolio should be in stocks.

In addition, he has a dangerous bias towards British stocks. A lot of opportunities are in international markets. Given he does not need his investments to produce any income – what the UK market is best at – it would be prudent to move part of the portfolio into global stocks.

While Mr Fraser said he was keen to pick his own stocks, in order to have a properly diversified portfolio he would need to spend a lot of time – and money – buying new companies. The typical investment fund has more than 50 stocks and some have more than 100 and with this in mind Mr Fraser should really be looking at funds. These offer him access to well diversified and, hopefully, well managed portfolios.

Mr Fraser should buy the iShares North American Equity Index fund for cheap access to the US market. He could then complement this with a couple of UK stock funds.

The Liontrust UK Growth fund focuses on large and mid- sized British companies that are growing profits consistently, and BlackRock Throgmorton investment trust owns smaller companies.

Jason Hollands

Managing director at Bestinvest Mr Fraser’s portfolio is incredibly concentrated, consisting of nine individual stocks and one investment trust. Moreover, a hefty 22pc is allocated to one stock, FTSE 250 member Rotork.

It is a high- quality business that makes filtration and measuring instruments for the oil and gas and other industries and has been a solid performer since the Covid crash. But committing more than a fifth of his savings is far too risky.

With both Jet2 and IAG, 13pc of the portfolio is in airlines. It would be tricky to find a more volatile sector than travel and leisure at the moment given the reemergence of Covid travel restrictions. The portfolio overall is skewed to sectors exposed to the ups and downs of the economy, known as cyclical stocks.

A less risky strategy would be to base the portfolio around a handful of investment trusts so the investments are diversified across different markets, sectors and themes.

Scottish fund group Baillie Gifford’s global growth-orientated Monks investment trust, which has an impressive record investing in fast-growing companies, can be bought at a 3.5pc discount to the value of its stocks. The venerable F&C investment trust, which invests globally, can also be picked up on a 7.9pc discount

To dampen down the risks of being solely invested in stocks, he might also consider RIT Capital Partners, which has long been home to assets of the Rothschild family. RIT invests in listed shares, but also hedge funds and private companies.

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