Forget glamour ...and invest for the long term
IHAVE always believed that the best way to accumulate wealth is by investing – while keeping your debts to a minimum. Although it is a personal strategy that is still a work in progress, I am confident that in two years’ time I will be mortgage debt free – and sitting on long-term investments that should provide me with a soothing financial blanket to see me through until the grim reaper calls.
Opposite, my colleague Holly Black interviews some of the country’s leading investment experts as to where they think investment opportunities lie in the future. It all makes for interesting reading, especially the merits of investing in emerging markets such as India and having exposure to income-generating infrastructure funds. This country is crying out for more infrastructure spending given the chronic state of our trains, motorways, roads and Tube.
Intrigued though I am by the thoughts of the professionals, my investment strategy does not swing on an annual pendulum, other than ensuring I utilise as much of my Isa allowance (£20,000) as possible.
I prefer to adopt a simple approach to investing for the long term. One that does not involve chasing the next investment theme or taking unnecessary risks.
It is more the strategy of a marathon runner – I’ve done a few dozen 26.2 milers in my time – than a sprinter, which I was never good at despite kidding myself in my early 20s that I might make a half decent winger on the rugby field (the ligaments in my ankles were not up to the task).
My investment process is built on the following foundations. First, invest in the company pension scheme on a regular monthly basis. It is a no-brainer given the tax relief boost I get on my contributions, plus the payments my employer makes on my behalf into my pension fund.
Any spare cash – and there is not much – is then divided between monthly payments into an employee share scheme and an Isa. The shares I buy in DMGT – my employer – are free from tax when I come to sell them, provided I have held them for three years. I see them as icing on the cake, maybe providing a tidy sum at some stage to travel to some of the places I have never ventured near (Australia, New Zealand and Peru). As for the Isa, it is built on a core of longstanding investment trusts. Investment vehicles which have common characteristics. All are globally invested, have low ongoing charges and records of unbroken annual dividend growth going back at least 20 years.
They are investments which will never have glamour appeal and not be top of the performance charts. But equally they will rarely let you down. For building long-term wealth, they are near perfect.
The trusts I hold are among a list of ‘dividend heroes’ compiled by the Association of Investment Companies. Trusts which are not necessarily invested worldwide – some are UK focused – but all have at least 20 years of sustained dividend growth. You can take a peek at theaic.co.uk. Alternatively, drop me an email or a letter (I love receiving post) and I will send you the list myself. NOTHING can suppress the grief triggered by the death of a loved one or a parent. I discovered that in May this year when my dad died at age 90.
I still grieve for him. Indeed, I took time out on Christmas Day to visit his memorial stone at Sutton Coldfield Crematorium before heading back to the Belfry Hotel for lunch with my mother. One or three tears were shed on to the roses that my sister and brother had left a week earlier, on what would have been his 91st birthday.
One of the few blessings in the wake of my father’s death was the discovery of an old insurance plan that helped mitigate the cost of his funeral (beautifully arranged by Lilies of Sutton Coldfield).
It is a type of insurance policy I would recommend to any couple over the age of 50. Alternatively, a good pre-payment funeral plan.
On cue, financial ratings specialist Fairer Finance has just scrutinised the quality of providers operating in these two markets. Unlike other ratings agencies, it does not hand out its accolades like confetti.
As a result, only three get its top mark – five stars. They are Royal London (over-50s life cover) and Co-op Funeralcare and East of England Co-op (prepayment plans).
Worth checking out in the New Year if, like me, you are aged half a century or more.
Happy New Year.
Mine is more the strategy of a marathon runner (I’ve done a few) than a sprinter