Bellmont Featured in Financial Review Smart Investor Magazine
posted on January 18th, 2013 by David
by Jackie Pearson.
AGE : 70 and 46
OCCUPATION : Retired IT consultant and certified practising accountant, both business owners
LOCATION : Carlingford, Sydney
INVESTMENTS : Australian shares
PORTFOLIO WORTH : > $1 million
INVESTMENT GOAL : To double portfolio value so they can both enjoy retirement
I’ve been investing in shares since 1985 but my then partner … preferred property but we didn’t have a good experience with one property. My view of property investing is that you have to look at it pretty well as a full-time job. I encouraged my partner to switch to share investing and we got much better outcomes.
The first time was when the Commonwealth Bank privatised. I was actually against the privatisation. I thought the national bank should have stayed in public hands. I decided that since I couldn’t do anything about the privatisation, I might as well buy some shares. So I invested $5000, all the money I then had available.
The bank recommended a broker whom I stayed with for quite a few transactions. I got my fingers badly burnt by one shareholding the broker was convinced would do quite well. That’s when I switched to trading online with CommSec. I like to do it all myself online. Although the old broker provided a lot of research, CommSec also published heaps of information and their seminars were very good.
Since then I have added to the value of my portfolio through my work and then investing. When my former partner died he left me an estate, as did my father. Ronghui and I own our home in Carlingford [Sydney] and I’ve still got a self-managed super fund. Ronghui is a CPA and, naturally, he is my accountant.
I believe you get better returns as an individual investor. Managed funds don’t have the transparency I like and you are too affected by the actions of the other unit holders. One exception many years ago was the Tyndall Special Situations Fund because of its consistent low risk and high income.
We use expert information when selecting stocks and weightings in our direct share portfolio because we try to diversify and not have too much exposure to any one sector.
I prefer the Lincoln Stock Doctor [program] as it has excellent information on all Australian stocks but it allows you to set your own, fairly strict, criteria. Lincoln has a whole team that analyses annual reports and changes valuations accordingly … We’re also members of the Australian Investors Association (AIA) and attend their seminars. We also use Rivkin for short-term investment opportunities.
Our goal is to double the current value of our portfolio so Ronghui can also enjoy retirement. Whether he’d actually stop working is a moot point because he’s a workaholic, but that’s the goal. So we were looking for opportunities to continue to grow our investments in a difficult marketplace.
We were very impressed by a presentation at the 2011 AIA conference by Bellmont Securities, portfolio managers who prefer to use SMAs as investment vehicles. They had convincing expertise and an unusual lack of hype. We subsequently had quite a long chat with the directors, who were very accessible and answered a lot of questions clearly.
So in February 2012… we committed some money to a Bellmont model portfolio that tracks the weightings of the ASX 200 and uses XJO index call options to generate income and reduce volatility. Since inception in 2009, it has consistently outperformed the index, with much better income growth and a lot less volatility. Our annualised rate of return, net of fees, is thus far 14.87 per cent and we’re very happy with that.
The SMA gives us all the advantages of individual share ownership. We have input into stock selection. An online portal means we have complete transparency and can see our holdings, fees and returns. Reports and forecasts can be produced at any time and we’re totally unaffected by decisions made by other investors. The SMA has lower fees than most managed funds and you get annual audited returns, which isn’t the case when using a broker with a direct portfolio.
At first we attempted to take advantage of the model portfolio with a direct broker relationship but you have to be able to move very quickly to reweight the portfolio if something major happens, and if there are delays in contacting me to approve transactions the portfolio’s performance can be damaged.
That’s why I moved to an SMA. I wanted to give the team the discretion to buy and sell to build income quickly without having to wait for the arrival of signed paperwork in the mail. Fees are also slightly cheaper than with a direct account.
I believe in value investing. You have to look at the company and how it’s managed to come to any understanding of its potential to generate growth and income. You can’t just look at its market price. But that doesn’t mean I only buy blue-chip shares. Looking at banking, for example, I wouldn’t have NAB at the moment because I believe they have made some careless decisions. ANZ and Commonwealth are the only bank stocks that currently satisfy my criteria.
At the moment we’re living through times where the whole capitalist system is being tested, and that’s putting it mildly. Looking at the value of the underlying company is the best way to reduce risk and volatility. I’ll be looking at adding a value-based model portfolio through an SMA next, to complement my direct share holdings.