Simon Ashley is 60 and has been investing for 25 years. He and his wife have recently retired with inflation-linked pensions that easily meet their day to day needs. He invests using their individual savings account (Isa) allowances to the maximum each year and uses his investment portfolio to pay for holidays and treats.
He says: "I am trying to protect our capital against the government debauching our hard-earned capital. I am willing to take some risk as I do not regard holding cash as risk-free. I have more faith in some big blue chips than I do in the UK government.
"I tend not to trade except that if a share gives me 20 per cent profit in a short period of time, for example, three months, then I seriously review the investment with a view to selling to capture profit. Similarly, with losses."
In addition to his main home, he has a small house which he rents out to a relative. He has an interest-only £60,000 fixed rate mortgage which has to be paid by 2019.
He and his wife have no children.
Surplus income
Conservative retirement portfolio
Simon Ashley's Isa portfolio
| Name of shareor fund | Number of shares/units held | Price | Price (£) | Value (£) |
| Berkeley Group holdings (BKG) | 1000 | 2,044p | £20.44 | £20,440 |
| Subsea 7 SA (0OGK:LSE) | 500 | 128.95 NOK | £14.37 | £7,185 |
| BG Group (BG.) | 948 | 1,191p | £11.91 | £11,290 |
| Delta Lloyd NV (0MK9:LSE) | 500 | 14.64 Euro | £12.48 | £6,240 |
| ETFS Physical Gold ETC (PHAU) | 448 | 135.25 USD | £86.54 | £38,769 |
| Fresnillo (FRES) | 1490 | 1,079p | £10.79 | £16,077 |
| Novo Nordisk AIS (0MDO:LSE) | 255 | 933.75 DKK | £106.66 | £27,198 |
| Roche Holding AG (ROG:VX) | 130 | 229.4 CHF** | £158.76 | £20,638 |
| BHP Billiton (BLT) | 516 | 1,815.5p | £18.15 | £9,367 |
| Gjensidige Forsikring ASA (0OJC:LSE) | 1275 | 88.29 NOK | £9.84 | £12,546 |
| Middlefield Canadian Income (MCT) | 20660 | 106p | £1.06 | £21,899 |
| Munich Re (MUV2:GR) | 60 | 142 Euro ** | £121.01 | £7,260 |
| New City High Yield Fund (NCYF) | 23170 | 63p | £0.63 | £14,597 |
| Swisscom AG (SCMN:VX) | 50 | 404.7 CHF** | £280.08 | £14,004 |
| Syngenta AG (SYNN:VX) | 81 | 361.8 CHF** | £250.39 | £20,281 |
| Tesco Personal Finance 1% RPI linked notes 16/12/19 | 10000 | 103.5p*** | £1.03 | £10,350 |
| Imperial Oil (IMO:CN) | 250 | 39.59 CAD** | £24.92 | £6,230 |
| Statoil ASA (0M27:LSE) | 1400 | 126.75 NOK | £14.13 | £19,782 |
| AstraZeneca (AZN) | 238 | 3,235.5p | £32.35 | £7,699 |
| GCP Infrastructure Investments (GCP) | 21238 | 109p | £1.09 | £23,149 |
| GlaxoSmithKline (GSK) | 797 | 1,675p | £16.75 | £13,349 |
| National Grid (NG.) | 370 | 746p | £7.46 | £2,760 |
| Nestle SA (NESN:VX) | 1562 | 62.1 CHF | £42.98 | £67,134 |
| NS&I Inflation linked savings certificates 3 and 5 years | N/A | N/A | N/A | £120,000 |
| 5-year inflation linked (plus 1%) cash Isa | N/A | N/A | N/A | £60,000 |
| Fixed rate cash Isa | N/A | N/A | N/A | £20,000 |
| Cash on deposit 2.75% | N/A | N/A | N/A | £125,000* |
| TOTAL | N/A | N/A | N/A | £598,244 |
MOST RECENT TRADES:
Buy: Berkely House Builders, Subsea 7, Roche
Sell: RSA at a loss, Chesnara at a profit
WATCHLIST:
Tag Immobilien, Bayer, BASF, Heidleberg Cement, Svenska Handlesbanken.
Oxford Instrument Group, Dignity.
Baillie Gifford Japan investment trusts or a Japan ETF
EXPERTS' COMMENTS
Helal Miah, investment research analyst at The Share Centre, says:
From an asset allocation perspective, I would not disagree with your investment choices given your circumstances. An allocation of roughly 43 per cent in equities, 40 per cent in bonds and cash, 12 per cent in property and just under 5 per cent in gold would, on the whole, be fair, based on your mortgage not being included. However, depending on how much importance you give to capital preservation, you could consider shifting more funds away from equities.
The portfolio, as a whole, generates an yield of roughly 3.5 per cent, with a fairly equal contribution from the equities compared to the rest of the portfolio. It's difficult in the current climate to get more yield from cash, but I would say that you have done well in picking RPI-linked National Savings products and the Tesco bond as a shield against inflation. Despite the fact that you don't really need the income from the portfolio, it would be wise to carry on with a similar asset allocation strategy for capital preservation purposes and reinvesting the income that is not immediately needed.
Looking at the equity portion of the portfolio, there is a relatively large exposure to non-UK stocks (nearly 60 per cent). While this addresses your concerns about the UK economy, conversely you could say that there is not enough exposure to the domestic market. This is especially the case if you consider the fact that most of the UK stocks in the portfolio, with the exception of Berkeley Group, already generate large chunks of their sales from abroad anyway. Therefore, the portfolio could underperform should we see a reviving UK economy or stronger sterling.
In terms of sectors, there is an emphasis towards the pharmaceuticals, which is good for income and the defensive nature. However, we must bear in mind the troubles within the sector and the impact to the large-cap pharmaceuticals from the generic manufacturers in the coming years.
Another large exposure is to Nestle, again traditionally defensive. But growth expectations from the company's expansion into emerging markets can be partly blamed for the relatively poor yields to be had from the stock, and the hunt for yield by investors looking at the traditional defensive sectors. Some thought should probably be given to reducing the risk from this stock given how much is owned.
There is a good mix of growth-focused and income stocks within the oil and gas sector. Like Statoil, an investment into some other large caps such as Royal Dutch 'B' or BP would help to boost the portfolio's yields.
As result of a top-down approach to stock-picking, the portfolio is focused on a relatively few sectors and some investment opportunities in other sectors may be missed, such as the engineers, general industrials or even retailers. Another result is that in terms of international exposure, the equity portfolio has become fairly European-focused, particularly northern Europe. The portfolio will become even more focused on northern Europe if you buy some of the stocks on your watchlist. On the other hand, it could be considered that there is a lot of value in European stocks at the moment given the problems within the region.
Paul Taylor, managing director of chartered financial planners McCarthy Taylor, says:
If you like strong economies and big blue chips, then the FTSE 100 and, to a certain extent, the FTSE 250 will fit your investment strategy. Having dividends paid in foreign currencies involved possible bank charges for currency conversion and a complicated tax return due to withholding tax on foreign dividends.
Purchasing and dealing in investments in foreign currencies poses additional risk to the portfolio - investing overseas in sterling-listed funds will still gain from currency movements of the underlying stocks, but without the additional costs associated with buying overseas.
Holding gold exchange traded commodities (ETCs) is like dealing in currency - gold does not pay any dividends and can be volatile. Although it is sometimes quoted as a hedge against inflation, we do not agree. Gold will fall as quickly as it rises and we are seeing that to some extent now.
You say that you are gaining exposure to the US dollar through your holding in Middlefield Canadian Income which invests in Canada, because you feel the US and Canadian dollar will track each other. While we like this trust, there is no guarantee of positive correlation between the US and Canadian dollar - short-term trends show the opposite (source: University of Columbia Sauder Business school). If you want exposure to the US dollar, many exchange traded funds can be bought in US dollar.
You say you are looking at what fund managers are buying, but by doing this you may miss the boat as they will not disclose their holdings until they have bought their position, which may influence the price you pay.
You say you have worries as to how you might react to a long sustained fall on the markets. This is not consistent with the investments you have made. We would consider your portfolio of a relatively small number of direct equities as higher risk.
We have many clients who hold direct equities as a way to save management fees. However, there are a minimum number of stocks we would like to see to ensure diversification. This portfolio does not have enough and some of the share holdings could be split down.
Your portfolio is not balanced, it does not match your attitude to risk and is very condensed for the portfolio value, although we do like the fact that pharmaceuticals make up a large part of the portfolio.
We would look to increase the number of holdings whether direct equities via the FTSE 100 in companies with international exposure, or via ETFs which will cheaply replicate the market.
A suitable asset allocation for the invested part of your portfolio should consist of 65 per cent in good quality equities with 75 per cent of these being FTSE 100 companies giving global exposure. We would recommend holding around £4,000 per line of stock which would give exposure to a much wider range chosen for the long term.
We would hold the remaining equities over a wide geographical spread looking at using collective investments such as investment trusts, open-ended investment companies (Oeics) or exchange traded funds (ETFs). ETFs are traded in many currency denominations such as US dollars which will fulfil your wish to hold some foreign currency.
You should also have around 5 per cent in commercial property and 5 per cent in infrastructure.
The remaining 25 per cent should be held in fixed interest made up of index linked and cash on deposit pending a correction in the bond market. This will allow purchases of new issue corporate bonds at par, which can then be held to redemption which will give the more secure part of the portfolio.
