CASE STUDY: This is my Post-Divorce Investment Plan

“I’m completely dependent on myself now, for my retirement, and for being able to either buy a house or buy out our home from my ex-partner when my youngest child leaves full-time education. And I’m responsible for all the other sundry expenses that come along, like the leaking ceiling I had recently!

“When it comes to my pension, luckily I’ve already made a start by contributing to various workplace pensions over the years.” Laura works in the charity sector and says each job she has had has paid a small pension “so at least this has been accruing for the [past] 25 years”.

Aside from this she says it feels like she is starting her again when it comes to her finances. To try and build up both short- and longer-term savings, she has started a cash ISA with Virgin. “This pays about 2% which doesn’t seem too bad.”

Laura also has an older investment ISA, opened around 10 years ago, which she has started saving into again.  She also has Junior ISAs that she opened for her children.

Initially she was just contributing small lump sums when she had the money, but following the divorce, she is now taking a more proactive approach.

A Global Focus

Currently, Laura invests in a couple of funds through her ISA — which she holds with Chelsea Financial Services.

She invests in Schroder Asian Alpha Plus and Lazard Global Equity Franchise. She says the Lazard fund has done particularly well. “I’ve made some money through this fund even though stock markets have fallen in the past year.

“The Schroder fund has gone down a bit recently, but overall, I’ve still made money from this investment.”

This Schroder fund has a Morningstar Analyst Rating of Bronze. Analyst Lena Tsymbaluk notes that despite the previous manager of this fund retiring, it retains a number of attractive qualities for investors, including solid analyst resources and a robust underlying framework, with the new manager having built up considerable experience managing money in this sector.

The fund has delivered a solid long-term performance, delivering annualised returns of 9.76% over the past 10 years and and 8.68% over a three-year period, according to Morningstar data.

As Laura points out, Lazard Global Equity Franchise is up on the year to date, by 9.9% according to Morningstar figures. This fund seeks long-term defensive returns, by investing across the world in different franchise companies, which it claims offers investors predictable earnings and a competitive advantage on rival firms.

Having a defensive approach has helped the fund hold its own in the more volatile stock markets seen this year. But that doesn’t mean it has underperformed prior to this, when equity markets have been more buoyant. In fact, the Lazard vehicle has delivered annualised returns of 11.92% over three years, and 9.14% over five years.

Investing for the Children

Both the Junior ISAs are invested in Rathbone Global Opportunities. Laura says: “This did really well for a long time, but has gone down a bit this year. But I am happy to stick with it for the time being.”

Rathbone Global Opportunities has a Silver-rating and 5 Stars, reflecting its strong performance relative to both peers and its benchmark in recent years.

Analyst Bhavik Parekh says this fund is a “great option for investors seeking exposure to high-growth mid- to large- cap equities”. The team retains strong conviction in the fund managers and their ability to add value for investors.

Although down 20% overall in 2022, the fund has delivered annualised returns of 13.35% over the past decade and 8.82% over the past three years.

Laura says she may look to add a few additional funds to this ISA in the next year, but says it is not easy to know what to invest in. “There is so much choice and lots of jargon and being a single mum with two children doesn’t leave a lot of extra time to look at things like my investments.”

However, she says she does look at Chelsea’s magazine, which has fund ideas and has also started listening to the “Investing on the Go” podcast. “This has been really interesting. I like hearing how they are making money and sometimes they mention companies I know or things I know about, so it makes it all seem a bit more real.”

The Cost of Living Hurdle

When it comes to choosing funds and investments, Laura says she looks at fund fees and charges, but also considers performance. “I’m more concerned that my investments do well rather than how much I am paying for them. I don’t need to double my money each year — although that would be nice! — but I do need them to be consistently making me a bit of money.

“I am starting a new job soon with better pay so I’m going to be able to save a bit more into my ISA each month. However, if bills go up again in October, as expected, this might restrict what I can save.

“I’m hoping to put £300 a month into the cash ISA so I can build up an emergency pot of money and hopefully have a further £300 to invest in the ISA for the future. Stock markets are a bit scary at the moment though – as is the world in general – but I am hoping that if I invest a bit each month and don’t look at it, it should be ok.

“I’m realistic enough to know that my retirement plans will have been put back a few years, as I have to sort out savings for the kids and house first. But hopefully, starting to save more regularly will help get my finances back on track.”

Originally reported by Emma Simon at MorningStar. Read the article here

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and investor do not constitute financial advice.