‘I want to add £300k to my portfolio – what is best for capital gains?’

Dear Victoria

I am 53 and employed. I have just sold a property and would like to invest £ 300,000 to maximise my assets. I do not need the income right now. I am more interested in long-term gain and tax efficiency. Can you please advise how best to invest? – Nohra

Dear Nohra

Congrats on the sale of your property – that’s no mean feat given the stagnating housing market. You are in a fantastic position, in employment with £300,000 to invest at age 53.

The first thing you now need to think about is minimising tax. The aim should be to get your money into tax- efficient wrappers as quickly as possible. Start by using up your Isa allowance this year, if you haven’t done so already, and be ready to put the full £20,000 into your Isa when the new tax year begins on April 6.

On to your portfolio, the first thing I notice is a heavy weighting towards dividend stocks. Given that you’ve specified that you’re not looking for income, this seems a bit curious. Your second and third biggest holdings, Vodafone and Diversified Energy have hefty yields, but have landed you with capital losses. I’d suggest rejigging your portfolio so there’s less emphasis on dividends and more focus on long-term growth. But if you do retain some of your income stocks, make sure to reinvest the dividends so you can at least benefit from compounding over time.

Next, most of your holdings are UK listed. Income investors are typically drawn to London-listed stocks thanks to the attractive yields. But the FTSE 100 and the FTSE 250 have underperformed their equivalents in the US and Europe over recent years. Therefore, I’d suggest that going global is much better suited to your long-term growth goal.

The US, and its tech sector has been a fantastic source of growth and your holding of Microsoft suggests you’re aware of this. But the tech giant accounts for just 2.5pc of your portfolio.

I’d suggest allocating a more meaningful percentage of your portfolio to US tech funds, which will spare you the burden of having to pick individual winners and will provide greater diversification. You might like to look at Sanlam Global Artificial Intelligence, an active fund which costs 0.5pc, aims to pick winners from the AI revolution and has more than doubled over the past five years. Alongside it, Legal & General Global Technology Index Trust is another worth researching. It is in the top quartile of tech fund performers over one, three and five years.

You could top up your US exposure at low cost via Vanguard’s S&P 500 ETF tracker ( VUAG). It is a top quartile performer over five years versus other US funds and reinvests all dividends, costing just 0.07pc. A global fund could also add true diversification as an ideal core holding. iShares Core MSCI World ETF has an ongoing charge of just 0.2pc, and F&C Investment Trust offers active management and access to a diversified range of assets for an ongoing charge of a reasonable 0.84pc. In terms of other long-term growth areas, emerging markets could be worth exploring. It has been punished lately by China’s bumpier- than- expected period postCovid, but recent data has pointed to some tentative green shoots of recovery. JP Morgan Emerging Markets Investment Trust trades at a discount, providing you with exposure to names like TSMC, Tencent and Samsung on a high single- digits discount, so you are effectively picking exposure to those firms on the cheap. As Warren Buffett says, be greedy while others are fearful.

Moving on from growth, I notice that over 60pc of your entire portfolio is allocated to a single stock, BP. There’s no denying that the oil giant has been a blockbuster winner, landing you with gains of about 50pc. And there’s still reason to be bullish towards the stock. But as a rule of thumb, you don’t really want more than 10pc of your portfolio allocated to any single name because of the risk of unknown events.

I notice your holding of pharma stock, Euroapi, of just over £100. This is insignificant compared with your portfolio size so I’d suggest either upping your allocation to a meaningful amount or getting rid of it. If you’re keen on healthcare and want to add some “quality” shares to your portfolio, Fundsmith Equity has a punchy allocation of 26.4pc healthcare.

The fund’s biggest holding is Novo Nordisk, a stock that’s created a lot of excitement among investors recently thanks to its anti- obesity drug. It has become Europe’s most valuable company surpassing LVMH. It offers a nice mix of both growth and defensiveness which align with your goals.

You ask some great questions and that, with your focus on tax efficiency, is an excellent starting point.

‘I’d suggest rejigging your portfolio so there’s less emphasis on dividends and more on growth’