A Royal Navy engineer takes on his daughter – whose investments are shipshape?

A Royal Navy engineer self vs his daughter’s this portfolio game

Taking the reins of a portfolio with limited investment experience is a daunting and time-consuming task – but the challenge is doubled when another portfolio, which requires a different investment approach, is added to the mix.

Derek Fortune, a 47-year-old engineer in the Royal Navy, has taken a stab at building his own Isa, which he expects to leave untouched for a decade, and his daughter’s Junior Sipp, which has a 43-year runway to grow before it can be accessed.

“I’ve built the portfolios by following investment tips in the Telegraph, using a mixture of active and passive funds. But I’m lost about what to do next,” said Mr Fortune, from Dumbarton.

About two thirds of his Isa, worth £35,500, is invested in passive funds tracking global, British and American stock markets. This is complemented by active funds, including Scottish Mortgage , an investment trust that buys fast-growing companies, and International Biotechnology Trust , a specialist healthcare investment fund.

His daughter’s Sipp, worth £17,500, is half in tracker funds, a third in cash from his sale of shares in Scottish Mortgage this year after a strong run, and the rest in active funds.

Mr Fortune asked: “What should I do with this cash in the Sipp and is my Isa in good shape? I have taken a similar approach to both portfolios – but is this correct?”

Derek Fortune’s portfolio

Pie chart with 10 slices.

Created with Highcharts 9.2.2Fidelity Index US​Fidelity Index USFidelity Index UK​Fidelity Index UKScottish Mortgage​Scottish MortgageVanguard S&P 500 ETF​Vanguard S&P 500 ETFVanguard LifeStrategy 100% Equity​Vanguard LifeStrategy 100% EquityInternational Biotechnology Trust​International Biotechnology TrustBaillie Gifford Managed​Baillie Gifford ManagedBaillie Gifford American​Baillie Gifford AmericanASI Global Smaller Companies​ASI Global Smaller CompaniesArtemis US Smaller Companies​Artemis US Smaller CompaniesDerek FortuneDerek Fortune’s portfolio

End of interactive chart. James Calder, research director at City Asset Management, said:

The Isa investments are higher risk than those in the Junior Sipp, which is the wrong way around, as money from the Isa will be needed sooner.

In the Isa, I would first reduce dependence on Baillie Gifford, which runs three of the funds: Scottish Mortgage, Baillie Gifford American and Baillie Gifford Managed.

I would sell Baillie Gifford American and buy an investment trust that holds private firms, such as ICG Enterprise. I would also sell ASI Global Smaller Companies and buy a fund investing in Asian or emerging markets stocks, such as Fidelity Asian Smaller Companies. Both these moves would diversify the portfolio and lower risk.

For the daughter’s Sipp, the first thing to do is invest the cash. Given the long time horizon, it is crucial to own funds tapping into the investment trends of the future, as well as keeping costs down.

I would keep the passive component of the portfolio as it is and spend the cash on active funds.

For my child’s Sipp, I own Augmentum Fintech, which buys financial technology start-ups in Europe, Chrysalis Investments , which holds fast-growing private firms, and Fidelity Asian Values, which invests in small Asian companies.

His daughter’s funds

Pie chart with 6 slices.

Created with Highcharts 9.2.2Cash​CashVanguard FTSE All World ETF​Vanguard FTSE All World ETFVanguard FTSE 100 Index Unit Trust​Vanguard FTSE 100 Index Unit TrustVanguard S&P 500 ETF​Vanguard S&P 500 ETFASI Global Smaller Companies​ASI Global Smaller CompaniesScottish Mortgage​Scottish MortgageDerek FortuneHis daughter’s fundsEnd of interactive chart. Jessica Ayres, financial adviser at Timothy James & Partners, said: Mr Fortune expects to draw on his Isa in 10 years, so the portfolio should balance high and low-risk assets, using a mix of stocks and bonds.There is some duplication in his Isa as the Fidelity Index US and Vanguard S&P 500 ETF track the same markets. A good option would be to sell the Fidelity fund, as the Vanguard ETF has performed marginally better, and invest the cash into bond funds. I suggest Federated Hermes Unconstrained Credit or TwentyFour Dynamic Bond.By contrast, the Junior Sipp is safe to be fully invested in stocks because money won’t be drawn from it for decades. However, I would suggest that some of its funds are changed. ASI Global Smaller Companies should be sold from the Junior Sipp and the Isa, which also holds it. The fund’s former manager, Alan Rowsell, was responsible for much of its strong performance and his new fund, Premier Miton Global Smaller Companies, is a good replacement. Mr Fortune has doubts over Scottish Mortgage – but we don’t share these. We remain positive about this trust, particularly as Baillie Gifford has been cutting its stake in Tesla , the electric car company, which had accounted for 16pc of the trust.He should invest some of the spare […]

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