Confessions of an Impulsive Investor: My magpie Isa of trusts and ETFs is up 20%

My father used to ‘play the stock market’. 

He folded the profits from his small business in the 1970s into company shares, some of which came as recommendations from his stockbroker, over the bakelite telephone with a twisted brown cord.

He added to this substantially with the big privatisations of the 1980s, and left a decent sum to my mum when he died in 1997. She fortunately sold the portfolio before the stock market went down the pan at the turn of the millennium.

What was left of that money came to me and my brother early in 2020 – a modest sum, nowhere near life-changing. So what better to do with it, than invest? 

Having always been denied by the demands of property, saving and London living expenses, this at last was my chance to put financial savoir faire into play. 

Betting on technology: ‘The world has changed, the interest rate environment has changed, the way we do things has changed and will continue to do so.’

The cash came to me in July when much of the bounceback in global markets from the Covid crash of the spring had already occurred, though with the UK lagging. The major narratives of the recovery – big tech, growth stocks, US, China, gold – were already quite mature. Played-out even, some were saying. 

There were murmurs of a reversal for tech and growth stocks more generally, and a rotation towards cyclicals and value as the world’s economies emerged from the grip of the virus.

Contrarily, I opened my Isa in August with the money spread pretty much equally across seven investment trusts: Scottish Mortgage, Allianz Technology, Polar Capital Technology, Edinburgh Worldwide, Biotech Growth, JPMorgan China Growth and Golden Prospects. 

So, pretty much the best performing vehicles of the previous one-to-five years then. Not very scientific? But also not thoughtlessly backing the form-horses. 

One, I figured that any funds that could perform spectacularly both after and before a crisis like coronavirus were probably positioned to succeed for some time to come.

Two, I do not buy into the idea of a big tech reversal, nor the traditional rotation from growth back into value or cyclical stocks. 

Both these trends may emerge in the medium term but not as significantly as traditionalists would have you believe. The world has changed, the interest rate environment has changed, the way we do things has changed and will continue to do so. 

Three, I’m in it for the long term. Which is fortunate because a few weeks after I made my initial play, the Nasdaq plunged. And another sharp correction struck in November. Gold began to lose its lustre. 

> If you are reading in the This is Money app, please click here to see the the table on our mobile site

While this isn’t money I can particularly afford to lose, it is money I can afford to take risks with in search of higher long-term returns. Buy and hold, and keep adding, whether that’s new elements or more of the best performers. 

What appeals to me is investing in areas that are poised to benefit from the huge secular transformations afoot in the global economy – whether that is digitisation or clean energy. And holding tight even if they suffer for a year or two. 

Each month since August I have siphoned lockdown savings into the Isa, adding different investment trusts and exchange traded funds as I saw fit. 

Now this might appear a scattergun approach. 

And indeed for some tastes there are possibly too many holdings and too much overlap, and definitely too much technology – but it is an experimental portfolio that can be rebalanced over the years.

The FTSE All Share index had risen 9.2 per cent since August last year at the time of writing

In September, I added holdings in three ETFs: iShares Global Clean Energy, L&G Battery ValueChain and L&G Cyber Security, each targetting a (in my eyes) crucial growth sector or sub-sector. In October, I added a fourth niche ETF: VanEck Vectors Video-Gaming / Esports. 

The next month, I decided I needed more Asia exposure as that region continued to cope with Covid better than the West. And so added Fidelity China Special Situations and Pacific Horizons. 

The latter I had been kicking myself since year dot for not buying into, deeming it too expensive even for my tastes. Of course, it just gets more expensive.

That same month the vaccine news came through. I had been putting off buying into a UK revival until a Brexit deal was sealed – or not – but this forced my hand. 

Prices for Schroders UK Mid-Cap, JPM Smaller Companies and Fidelity Special Values were already elevated by the time I could get in there. City traders don’t have to wait for their salary to arrive in the middle of the month. And indeed there was a pullback in the following fortnight as the euphoria wore off. 

The Invesco MSCI World ETF GBP is up about 9 per cent, though the USD-denominated version of the ETF would have served you a bit better. 

Some would argue that a FTSE 250 tracker would do the job just as well – but that would be showing a 5.3 per cent gain from 16 November to 5 January while my trusts have done substantially better. 

The FTSE Small Cap index was a stronger contender, up 7.7 per cent in the same period, while the FTSE 100 index lagged at 3.1 per cent.

In December, I digested the major asset managers’ outlooks for 2021, and the consensus was that apart from relatively cheap UK equities, the best bets for the coming year were emerging markets, Japan and healthcare, with a sprinkling of clean energy and green technologies. 

So I added the JPMorgan Japanese trust and a relative newcomer with the name and investing influence of an emerging markets veteran attached, Mobius Investment Trust. 

 On the healthcare front I want to add a companion to my Biotech Growth holding but need to run the rule over the other trusts in the sector, plus the ETF options. That’s a job for this month.

Despite this magpie-ish plucking of nice shiny objects, the portfolio seems quite robust: there are very few weeks or even days that it has decreased in value over the last six months despite some rocky moments in the markets.

It has returned just shy of 20 per cent, while over the same period Invesco’s MSCI World ETF was up 8.7 per cent. 

You can guarantee that if I’d picked 20 company shares, there’d be some howlers in there. But only one holding is down, and that’s my gold hedge, the Golden Prospects investment trust. Its 5.8 per cent loss I can handle, given that hindsight shows I bought in when gold was near its 2020 peak.

Regrets? 

Not buying a whole lot more of the iShares Global Clean Energy ETF. In the coming months I will either do that or choose one of the newer investment trusts in the renewables or energy storage and efficiency sphere that aren’t trading at a huge premium, as the incumbents are. 

My main regret is that I have a lot more investing ideas than money to implement them – but don’t we all. 

Plans?

To get some UK or global equity income in there – with something like City of London or Scottish American trusts – and some exposure to commodities and resources to ride the cyclical wave. As well as more whizzy ETFs: artifical intelligence, ageing populations, the cloud, maybe even the elephant in the room bitcoin.

On this front I like to think I would have been in there before the festive boom, were it not for the absence of any such ETF on my Isa platform…

Fears?

I don’t think it is imminent but the big threat to my portfolio would be inflation and interest rate rises. It’s still not clear if or when the huge amounts of fiscal and monetary stimulus around the world will feed into higher consumer prices.

The Impulsive Investor’s next update on his Magpie Isa will appear in about three months’ time.