Jake Graham is in his early 30s and has already been an active investor for the past decade. Jake, who trained as a chartered accountant, has tried to save some of his salary ever since he started working. When savings rates on high street accounts plunged after the financial crisis he started to look at the alter-natives, and decided that investing in the stock market could help boost his re-turns.
Jake has built a portfolio of individual shareholdings, rather than investing in funds or investment trusts. He typically holds around 10 to 12 stocks at any given time and invests through an Isa with fund supermarket AJ Bell.
“This certainly makes it more tax-efficient in terms of receiving dividends, and capital gains are also tax-free,” says Jake. He also thinks the charges suit smaller investors like himself – it charges 0.25% for investors with up to £250,000 and £9.95 for each share trade.
While Jake, who lives in south east London considers his investments to be “a bit of a hobby”, it is one he hopes will deliver decent returns over the longer term and hopes his savings and investments will enable him to get onto the property ladder in future.
Buying and Selling
Jake tends to invest around £1,000 when buying into an individual sharehold-ing. “It doesn’t seem cost effective to invest with less, once charges and stamp duty are taken into account,” he points out.
He is “not a particularly active trader” and buys shares with a view to holding them for some time. “Brokers like AJ Bell do periodically have offers on dealing charges but typically you have to do so many trades a month to take advantage and this doesn’t always suit me,” he adds.
Jake aims to invest in companies he believes are undervalued and whose share prices he thinks will recover. While some of his shares have performed better than others, he has generally been happy with the returns he has achieved so far.
He says: “I’m not looking at any particular sector of the market – I own shares across the board – but I am looking for companies where I feel there is some po-tential upside.”
It was this outlook that led him to invest in the retail giant Tesco (TSCO), after its profits – and share price – were hit by a combination of an accounting scan-dal and pressure from the so-called “discount” supermarkets, such as Lidl and Aldi. Since investing, Jake has seen a “reasonable” return on his money.
Other longer-standing holdings include British Land (BLND) and UDG Healthcare (UDG) - he sold the latter after making good gains but it has contin-ued to rise in value since. It highlights a common challenge faced by investors: the difficulty in knowing when to sell and take profits and when to let your winners run. Jake says this conundrum is often trickier than decide which shares to invest in in the first place.
British Land is an investment trust that owns and manages a portfolio of prop-erties across the UK. The share price of this trust grew steadily between 2012 and 2015, although prices have fallen back more recently.
However, according to Morningstar data, shareholders have enjoyed annual-ised returns of 7.19% over the past decade and 3.98% over three years. Over five years the picture is less buoyant, with annualised losses of 0.17% over this period.
As the name suggests, UDG Healthcare provides services to healthcare manufac-turers and pharmaceutical retailers. This UK-based company now has opera-tions in over 20 countries and this expansion has seen its share price grow in recent years. According to Morningstar data, investors have seen annualised returns of 19.72% over the past five years, compared to 6.34% by the FSTE 100 over the same period.
Not all of Jake’s investments have performed as well, though. An investment in-Intu (INTU), the company that owns a number of shopping centres, including Lakeside in Essex, has been particularly disappointing.
This company has suffered from the downturn in the retail market, with many people choosing to buy goods online instead. Shares have plunged from 278.8p three years ago to around 30p today. Investors have endured annualised losses of 38% over that period, and 23% over five years.
Jake, who now works in the private equity sector as a fund administrator, his investments thoroughly before buying: “I will look at the various companies tipped on websites and magazines and if a tip looks interesting, I might do a bit more of my own research. In many cases though this research means I don’t end up investing at all as the risks may be too high, or it doesn’t really look suitable for my portfolio.”