Why I’m sticking with my racy growth portfolio

Former editor of Money Observer Faith Glasgow reveals investing lessons she's learned during the 2022 downturn and why she’s broadly happy with her growth strategy.

Although I’ve been choosing and monitoring the funds and investment trusts in my own ISA and SIPP portfolios for well over 20 years now, I really don’t consider myself to be very good at it.

I am too easily swayed to be a good contrarian, and too lazy for effective momentum investing. I take more risk than I should and have failed to dial it down as the years go by. I repeatedly arrive late to the party and pay over the odds. In fact, now I think about it, I could write a lengthy and no doubt illuminating article on my own flawed judgement as an investor.

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However, as editor of the now defunct Money Observer magazine I read an awful lot of strongly argued articles, views and analysis; I was also involved in the discussions around the selection of interactive investors’s Super 60 funds. And over the years I have been very fortunate too in being able to talk at first hand with many extremely clever and focused professional investors and fund managers.

Despite myself, then, I’ve learned a lot; and those ideas have helped shape my own investment choices. As a consequence I can claim with absolute truth that my equity exposure is at least pretty well diversified in terms of geography and market capitalisation, with a broad mix of global, regional and UK funds holding small, medium and large companies.

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That’s less true when it comes to investment style. I have long gravitated to the growth-focused, future-facing and ‘sustainable' holdings that had such a good run up to and during the pandemic; in contrast I was very sniffy about more conventional funds likely to hold sin stocks such as oil or miners, and took relatively little interest in recovery and value-focused funds in recent years. (You can see where this is heading, can’t you?)

I also hold a reasonable spread of asset classes. Although the bulk of holdings comprises equity funds and trusts, I have had exposure to infrastructure, property, private equity and even capital preservation-focused trusts for some years. Fixed interest exposure remained practically non-existent until last week, when I belatedly got around to buying a couple of bond funds.

Covid crash

So where did that ‘up to a point’ diversification leave me when the past couple of economic downturns bit? When markets crashed at the start of the Covid pandemic in March 2020, my racy portfolio plummeted by about 30%.

My coping strategy, such as it was, involved selling a couple of funds early on, and then basically holding on for the ride, on the grounds that no one had any idea how or when anything like normal service would be resumed and it was way too late to even consider any other course of action anyway.

There are times when panic-induced inertia really does pay off, and that was one of them. As central banks started pumping money into the economy, lockdown life moved online and markets recovered from the initial shock, my growth-heavy portfolios outperformed on the back of the tech-powered market recovery through 2020 and 2021.

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Now, if I had been a cannier investor, I would have heeded the warnings I was increasingly reading (and the articles I was being commissioned to write) about overvalued tech stocks and the rising risk of supply shortages and inflationary pressures as the world opened up after lockdowns.

And to be fair, I did some rebalancing in 2021, selling some Scottish Mortgage (LSE:SMT) investment trust shares and Rathbone Global Opportunities units and increasing exposure to the UK; I even bought a UK recovery fund.

But the impact of 2022’s downturn has been a painful one, as it has been for most investors (although not helped in my case by a particularly badly timed purchase of Harborvest private equity trust at the start of the year).

Again, I have done a bit of tweaking around the edges of the portfolios to try and shift the balance away from their weighting towards growth, but nothing has really paid off so far. It does seem that there has truly been nowhere much to hide in the past months, though.

So what have I learned from all this? With hindsight, there are several aspects to my experience as an investor trying to weather the past two and a half years that are worth mentioning.

• Despite the global nature of the Covid pandemic, a diversified portfolio has been a really good thing. But I should have been more exposed to other investment styles, which would have held back performance last year but helped to cushion this year’s falls.
• In that context, a little exposure to racy choices can help to ease the pain, psychologically at least. I bought an India fund seven or eight years ago and it has had a fantastic run since the pandemic, as India’s domestically focused economy has steadily strengthened. A little flutter on a Vietnam fund has paid off to a lesser extent.
• I have held on to many (although not all) of the funds I owned before the downturns, because I believe they are still good investments run by disciplined, experienced managers, and the current downturn will not last for ever.
• In particular, although growth stocks have been having a hard time this year, technology and sustainable solutions are increasingly embedded in more and more aspects of modern life globally, and it’s the daily job of these managers to invest strategically with a long-term perspective.
• I am also more tuned in than I was to the notion of buying good value. I was a teeny bit pleased with myself, in fact, for the bright idea of drip-feeding cash in my pension into Scottish Mortgage after the trust tanked this spring. So far, so good.
• More broadly, I want to create a more balanced portfolio, and the return of inflation and interest rate rises makes that rather easier.
• The pandemic market recovery was a prime example of the danger of panic-selling. I don’t regret remaining invested and taking the pain in either downturn, because in the first one I would have missed the bounce and in the second I would have found it so difficult to know how or when to re-enter the market.
• I’m not going to touch my investments until they look relatively healthy again, so I must practice patience. I shall not look again at the portfolios until Christmas…honestly.