BY DOUGLAS CHADWICK, CHAIRMAN, SALTYDOG INVESTOR LTD
At Saltydog Investor we don’t believe that people should necessarily work longer, pay more into their pensions, or take out insurance for their twilight years. Yes, these things would help, but why doesn’t anyone suggest the obvious – make your current savings work harder.
If you’re frustrated by the lacklustre performance of your pension, ISAs and other savings then why not do something about it?
Many years ago, I was blissfully unaware of how poorly my investments were performing, assuming that my IFA was actively managing them to maximise my profits. I had sold my first business in 1985 and invested some of the proceeds in two Skandia Investment Bonds. I was withdrawing 5% per year, but was astonished when 15 years later I had seen no capital growth. I challenged my IFA and to my amazement found that I was still invested in the same property and balanced managed funds that they had recommended when the bonds were first taken out. The world had moved on, but my investments hadn’t.
I’d learnt the hard way that the financial industry generally promotes passive investing. You are put in a fund and are then expected to stick with it through thick and thin, while the fund managers and advisers sit back and count their commission. This is why it’s frequently reported that many tens of billions of pounds are left floundering in underperforming funds offered by some of the world’s largest financial institutions.
I decided to take control of my own financial destiny and have never looked back. At the time I only had access to around 40 funds, and had to track their progress long hand – the world is a very different place now.
How to ‘Do it yourself’
To make the most of your investments you need to follow a few simple steps:
- Take advantage of the low cost fund supermarkets and discount brokers
- Use tax-efficient wrappers like ISAs, SIPPs and Investment Bonds
- Manage risk by understanding the relative volatility of different funds
- Monitor your progress
Clear Well-Presented Data
Tracking 40 funds by hand was laborious, but possible; keeping tabs on the thousands of Unit Trusts, OEICs, Investment Trusts and ETFs that are readily available to the private investor is a completely different proposition. At Saltydog Investor we analyse all these funds and present a summary on a weekly basis in a way designed to help private investors see which sectors are currently performing well, and which are the best performing funds within those sectors.
We combine the Investment Association sectors into our own proprietary Saltydog Groups which are:
- Safe Haven
- Slow Ahead
- Steady as She Goes
- Full Steam Ahead – Developed Markets
- Full Steam Ahead – Emerging Markets
These groups help indicate the potential risk associated with each fund within them. Combine this with our up-to-date performance data and it’s easy to see whether the increased risk associated with the more volatile funds is currently being rewarded.
Skin in the Game
We also run a couple of demonstration portfolios to show how our data can be used and publish details every week. These are real portfolios and show what we’re doing with our own money. The ‘Tugboat’ is designed to be very cautious and avoiding losses when markets fall is as important as making gains when they rise. The ‘Ocean Liner’, below, is slightly more adventurous.
For too long the financial institutions have had it all their own way. They have taken their charges, regardless of performance, and grown fat on the apathy and inactivity of the private investor. The politicians are just as bad. To punish us for living longer, and to make up for their incompetent management of public finances, we are now being told that we will have to work longer, and then survive on smaller pensions.
Fortunately things are changing. Advisors are no longer able to take trail commission every year from your investments, and the investment houses have been forced to introduce funds where the hidden costs that used to go to the middle men now stay within your investments.
The recent growth of on-line trading has been astonishing. The way we shop, bank, arrange our insurance, book our holidays, and choose our utilities providers has changed forever. Surely our approach to investing will follow suit. If you use one of the many fund supermarkets, switching between funds only takes a few minutes and the costs are minimal. The Saltydog data makes shortlisting the funds that are
performing well straight-forward, and free on-line tools mean you can monitor performance whenever you choose.
I am not particularly computer literate, I don’t come from the financial industry, and I have had no formal financial training – yet my investments have consistently out-performed the market. The time has come for the DIY investor, and if I can do it anyone can.