Five years since starting to invest: doubled my money

Happy fifth birthday to my investment trusts

Just over five years ago, I started investing in the stockmarket – and since then I’ve doubled my money.

Back in 2015, I was so fed up with rubbish interest rates on my cash Isa that I was finally willing to risk investing, in the hope of higher returns. 

So on 25 September 2015, I split my £28,640 odd between four different investment trusts.

Last week on 9 November, thanks to the Biden bounce and vaccine news, my balance topped twice as much at £57,300.

Since then, markets have risen even further, pushing my portfolio to just over £58,390 at close of play yesterday.

Wowsers. 

I havered about posting this five year update, in the middle of a pandemic when so many people have lost their livelihoods. But investment platforms have also seen a surge in people opening accounts since March, keen to start investing after markets dipped. I’m always keen to encourage more women to invest, to chip away at gender pay and pension gaps.

I also hesitated because my own experience is hardly a perfect example of ‘how to invest’. 

As a personal finance journalist, I could write a textbook article all about asset allocation, rebalancing, drip feeding, fund selection and keeping an eye on costs – but it’s not what I actually did.

With the benefit of hindsight, would I go back and invest in the exactly the same things again? Probably not.

Would I suggest anyone else does exactly what I did? No!

But I can provide an honest account of my own (flawed) experience.

This post describes how my balance has gone up, down and sideways since starting to invest. I’m also planning a follow up about what I’ve learnt, and what I wish I’d done differently.

What forced me to start investing

Safe to say I’m pretty happy that I made the stomach-churning decision to switch from saving to investing.

But back then, it was a big deal for me.

Despite my job, I’d never invested my own money beyond a pension and Child Trust Funds for my kids, when the government was still handing out money to babies.

Sure, I wrote about investing and interviewed investment experts, but it didn’t seem relevant to me.

I’d included too many caveats about ‘don’t invest money you can’t afford to lose’ and ‘investments can go down as well as up’. Fair to say readers of the Daily Telegraph Money section generally have more spare moolah than the people writing it. Risk my own cash? Nuh huh.

I pottered along, stashing away savings, paying down our mortgage and going freelance.

While I could earn 4% or 5% interest a year, I was happy to stick with the safety of a savings account. But by 2015, after years of rock bottom rates, I was beyond fed up and forced to look elsewhere.

My lightbulb moment was recognising that I viewed my cash Isa not as emergency savings but for retirement, a good couple of decades ahead. My one big takeaway from writing about investing was that over periods as long as 10 to 20 years, the stockmarket overwhelming trumps cash. Sod saving, go straight to investing.

I was finally willing to start investing.

What if I’d stayed in cash?

I often think: ‘I wouldn’t have got that if I’d stuck with a savings account’. Or ‘It would have taken a lot longer to earn the same amount from savings’.

Yesterday, I actually had a look at what I’d have needed to earn in a savings account to double my money.

Mind. Blown. 

Get this. Taking an optimistic view of interest on savings accounts over the last five years, if I’d been lucky enough to scrape 1.5%. interest each year, then my original £28,640 odd would now be worth £30,850.

In practice, my investments have actually grown by nearly 15% year. 15%!!!

If I’d stayed with savings at 1.5% interest, it would take nearly 47 years to double my money.

That’s nearly half a century, to see the same returns my investments have produced in just over five years.

What did I actually invest in?

I’ve written a post before about where I chose to invest.

Basically, rather than picking shares in individual companies, I prefer to use funds, where a professional fund manager spreads the money over different companies, countries and assets.

TL:DR version is that I liked investment trusts (reasons why here), zeroed in on the list of dividend heroes that have paid rising dividends for many years, and then wimped out and asked a financial adviser which ones he’d recommend. 

He suggested three of the dividend heroes: City of London, Scottish Mortgage and Temple Bar, and added a fourth: Finsbury Growth & Income.

If you want to find an independent financial adviser yourself, search Unbiased.co.uk (affiliate link).

Scottish Mortgage: didn’t you do well

How did my investments perform overall?

In practice, my investments didn’t deliver 15%, year in, year out. 

Unlike a savings account, your balance bounces around all over the place, as stockmarkets vary. Historically, the overall tendency has been upwards, but with a lot of peaks and troughs along the way.

I started off with just over £28,640 in my cash Isa, and used it to buy four different investment trusts.

I took the highly unscientific approach of splitting my money four ways. I also went in all guns blazing, investing entirely in funds using ‘equities’, aka shares, rather than the much more sensible approach using a mixture of equities, bonds, property and a bit of commodities.

After the costs of buying the shares, which totted up to nearly £200 in dealing charges and 0.5% stamp duty, I ended up with £7,100 in each, plus a bit of cash.

Remember that unlike saving accounts that can be opened for free, you usually have to pay to invest: fees for the funds you choose, dealing charges and stamp duty if you buy shares, and costs for the platform you use to invest.

Year one: 17%

My first year was quite a ride on the stock market rollercoaster. Not ideal when I knew I had to report back for a national newspaper about how my investments had done.

It got off to a good start. After the first month, my portfolio had perked up enough to cover the costs of investing. 

But then markets trended downwards. By the low point in February 2016, my Isa was worth less than my starting point. If I’d sold then, I’d have lost over a grand. Luckily by March it was back to my original total. 

Then share prices fell sharply each side of the EU vote on June 23. I don’t actually know how my investments did, because I refused to check. As the money was earmarked for retirement, I gritted my teeth and hoped for longer term recovery.

Afterwards, the plunging pound pushed the London stock market way back up, taking my money with it. Hallelujah.

Scottish Mortgage got off to a great start, growing by a third, while Finsbury Growth & Income was up by a fifth. City of London grew by 13% and Temple Bar by 9%

My second year was slightly less extreme. My balance dipped a bit in November, ticked upwards by December, and carried on rising during the few times I checked.

Scottish Mortgage led the pack again, increasing by a quarter, while Temple Bar romped ahead by a fifth. Finsbury Growth & Income edged up 11% and City of London came in at 8%.

Balance on 24 September 2017: £39,190, up 17% over a year and 37% since starting. That’s over a third, adding more than £10,500.

Year three: 14%

The third year was more erratic. The FTSE 100 index of Britain’s biggest companies wobbled just after my third anniversary, peaked in January, plunged in March, bounced back in May, and then slid down a decline to September.

Even though my balance finished lower than part way through the year, I was still up by more than half, compared to my starting point.

By now, a real gap opened up in performance. Kudos to Scottish Mortgage yet again, up 30% over the year, while Finsbury Growth & Income packed on 15%. Meanwhile City of London only added 4%, and Temple Bar limped in with 1.4% growth.

Balance on 24 September 2018: £44,590, up 14% over a year and 56% since starting, adding £16,000.

Year four: 2%

2019 was the year my unfeasibly high growth ground to a halt.

Markets bumbled around. I didn’t bother logging in to my investment account while I wouldn’t see encouraging gains. I only recorded my balance once, in March. 

It was pretty disappointing when markets dropped just before my anniversary of investing. My previously double digit returns shrunk to a mere 2% for the year.

This was the first time any of my investments slipped backwards, compared to the year before. Scottish Mortgage dropped 7%, while still remaining my biggest holding. Finsbury Growth & Income surged on with another 15%, while City of London managed 5% and Temple Bar edged up 2%.

Balance on 25 September 2019: £45,500, up 2% over a year and 59% since starting, adding £16,900.

Year five: 12%

Hoo boy. If I thought my first year of investing was a rollercoaster ride, it’s had nothing on 2020.

I may not have touched my investments, but they moved themselves. My old investment platform,  Alliance Trust Savings, was bought up by Interactive Investor (affiliate link), so I had a new account to log into as of October 2019.

Check out Monevator if you want to compare costs on investment platforms

Everything was going gangbusters, with markets hitting all time highs in mid January.

Then *whomp* coronavirus hit, precipitating a 35% drop in the FTSE 100. 

Imagine seeing a third of your money wiped out. I tried not to.

Being a mature and sophisticated investor, I stuck my fingers in my ears, saying ‘la la la, I can’t hear you’, and refused to check my balance. I prefer not to know, rather than being panicked into doing something I might later regret.

Much to my surprise, when I logged in for the purposes of writing this investment update, my balance was actually slightly up on the January peak. 

Much as l’d liked to report that all my investments were a stunning success, they’ve actually been a mixed bag. I may only hold four investment trusts, but have managed to include both the worst-performing investment trust (Temple Bar) and the best-performing investment trust (Scottish Mortgage) since the start of the year, according to Morningstar.

Compared to my balances the previous year, Finsbury Growth & Income dropped 10%, City of London dropped 20%, and Temple Bar dropped by almost half. My overall balance was saved by Scottish Mortgage leaping 93% in a year – ie nearly doubling.

Balance on 24 September 2020: £51,170, up 12% over a year and 79% since starting, which is a chunky £23,600.

Last couple of months: 14%

Well many cheers for Biden’s election and vaccine news on November 9, which caused markets to shoot up.

In the two months since my investments celebrated their fifth birthday, my balance has soared a whopping 14% and is now worth more than twice my original cash. As an added bonus, because I invested inside an Isa, I won’t have to pay any tax on the gains.

Temple Bar has clawed a bit back, up by half from a low base so that it’s no longer showing a loss. City of London has perked up 15%, Finsbury Growth & Income is still doing fine, increasing by 5%. Scottish Mortgage remains my saviour, up 11% and now worth well over four times my initial stake.

Balance on 20 November 2020: £58,390, up 14% over the last two months, and 104% since starting, adding £29,750.

Yesterday’s balance, with many thanks to Scottish Mortgage. NB: ‘Value’ column shows current value, while ‘book cost’ shows what they were worth when transferred from my old investment platform to Interactive Investor in October 2019.

Review of my five years since starting to invest

Right now, I’m delighted my balance is worth more than twice what I started with, but I can’t claim it’s due to investing expertise on my part. 

I agonised over whether and where to invest, but since then I’ve done nothing other than pay the fees for the investment platform.

Markets soared and slumped, but I stayed put. I didn’t even choose what to do with dividend payments, just set the platform to reinvest them automatically in buying more shares.  

I could attempt to glorify this as a long term ‘buy and hold’ strategy (which experts recommend). However, I haven’t done anything sensible like rebalancing (which experts also recommend). 

Somehow my investments have made nearly £30K while I slept, thanks to the soaraway success of Scottish Mortgage, and despite the disappointment of Temple Bar. 

However, as my husband likes to point out, the growth is all on paper and could disappear if share prices fall. Without selling part of my stakes, or withdrawing dividends, I cannot access any of the gains.

While celebrating returns that have averaged just under 15% a year, it really isn’t realistic to expect anywhere near this long term, especially as we grapple with Brexit and the fall out from coronavirus.

For context, since buying my investment trusts, I’ve also added some passive index trackers with Vanguard, and opened a few test accounts with robo-advisers. These grew between 3% and 7% in the year to March 2019, sank between 12% and 18% in the year to March 2020, and have since bounced back between 28% and 35% from that low point. Different investments and different time periods produced different results. 

The common themes are that they have all bounced back to deliver more than savings, and after putting in the effort to start investing, you don’t necessarily have to spend much time managing investments afterwards.

Compared to the abysmal rates on savings, I reckon the stock market remains my best long term bet, as long as I can stomach the rocky ride.

Now – over to you. What’s your experience of investing? Would you consider starting? Do share in the comments, I’d love to hear.