DIY Investor Diary: my long-term strategy allowed me to retire early

In our DIY Investor Diary series, we speak to interactive investor customers to find out how they invest in funds and investment trusts, what their goals and objectives are, current issues and concerns regarding their portfolio, and what they’ve learned along the way. The premise is to try and provide inspiration for other investors, and we would love to hear from more people who would like to be involved. We do not require those featured to be named. If you are interested, please email our funds and investment education editor directly at: kyle.caldwell@ii.co.uk

Compound interest is the single most important thing to understand about successful investing. Those who invest as early as possible have the best chance of reaping the rewards from the magic of investment returns snowballing over time. This process can lead to extraordinary gains for those who keep on investing and have the patience to allow returns to compound.

The latest person to feature in our DIY Investor Diary series proves that serious wealth can be created by investing over the long term.

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The investor, who worked in the building trade, mainly holds a mix of collective investments (funds, investment trusts and exchange-traded funds, or ETFs), as well as some individual stocks.

He says: “My strategy has always been to build enough wealth to retire early, and I achieved that goal. I wanted to create wealth. You do need to leave some money in the bank, but it is a no-brainer that you need to invest in something that works for you.”

Given that he first started investing in the mid-1970s, when stock markets crashed due to the oil crisis, a key lesson is that by holding your nerve and investing regularly, you can ride out the storms.

As well as the oil crisis, our investor’s portfolio has experienced other major stock market sell-offs, including 1987’s “program trade” crash, the tech bubble at the turn of the millennium, and the global financial crisis of 2008. However, over time even those heavy falls end up being little more than a stumble in the stock market’s long-term rise.

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His main investment is a global equity fund that he has held for over three decades – Ninety One Global Strategic Equity. This comprises just over half the portfolio. Other long-term holdings include F&C Investment Trust (LSE:FCIT) and Janus Henderson UK Smaller Companies fund.

“For Ninety One Global Strategic Equity (formerly called Guinness Flight Global Strategy), it is all capital growth as it has all been in accumulation units. I put in £50,000 at the most and now it is around £800,000.

“F&C was the first investment trust I invested in [around 30 years ago]. That has been a solid long-term investment for me, a real ‘Steady Eddie’.  While Henderson UK Smaller Companies fund did really well in the late 1980s and early 1990s, it then tanked during the dot-com bubble. But it has performed well over the long term.”

He opted for a global approach to gain international diversification. However, he says that overall his “methodology for choosing investments is that I don’t have one”.

He adds: “I look at numbers and history, etc, but my guiding light is gut instinct, and if it feels right, then it probably is. It has served me well in my life in other areas.

“I sit on my hands a lot. I’ve accumulated a lot of wealth without complaining.”

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However, he likes a fund or investment trust with a sufficient amount of assets on the ground, and thinks that when a trust is big and popular it “is no coincidence”, as it is often an indication that long-term performance has impressed.

He prefers investment trusts over funds because the structure means a fund manager has a fixed pool of assets, so they are not forced sellers when money flows in or out. He also holds TR Property (LSE:TRY) and Templeton Emerging Markets (LSE:TEM) investment trusts.

As well as backing fund managers to beat the market, he has some ETFs, which aim to replicate the return of a particular market. He owns iShares Core FTSE 100 ETF (LSE:ISF) and iShares Listed Private Equity ETF (LSE:IPRV).

He’s always on the lookout for new opportunities, with Greencoat UK Wind (LSE:UKW) catching his eye at the moment. “Renewable energy really appeals to me, and this is an investment trust that pays really good dividends as well.”

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When it comes to individual stock holdings, he views this part of his portfolio as more of a hobby.

A long-term holding is Bellway (LSE:BWY), but he says that he’s always looking for new ideas, with UK smaller companies attracting his attention due to small-caps being at a possible turning point as interest rates fall. 

His top tips for fellow investors are to have a small allocation to cash, as “this can help to fund opportunities”.

However, it is even more important to stay the course. He says: “Always look to invest for a minimum of five years, but ideally much longer.”