What Investment speaks to an investment club whose portfolio used to featureindividual stocks before a switch to investing almost exclusively in funds.

The Solent Investment Club was established in 1999 to provide a group of friends and neighbours with an enjoyable and social way to share an interest in investing.

The club currently has five active members, based in and around Fareham, Hampshire, who meet once a month in the bar of a local marina to discuss their investment options.

David Miles, treasurer and founding member of the club, says, ‘Every member is invited to bring investment ideas to the meeting, where they are discussed before being put to a vote. The ideas with the majority of votes get chosen.’

Funds over equities
The investment method that the club follows has changed little in ten years, but the ideas that members bring to
the meetings has changed considerably. While once it was only individual stocks that were suggested, now it’s far more likely to be funds.

‘To be honest, we weren’t the best at picking individual stocks,’ admits Miles. ‘We would have one or two winners, but mostly they were losers. So, about five years ago we decided to stop researching individual companies and start looking at different sectors instead.’

Since then, the club has invested in a wide range of geographical regions including India, the Far East and Brazil, and in different commodities such as precious metals and oil, through various funds rather than directly in equities.
‘Funds have the advantage that, like shares, they are very liquid and easy to trade, while at the same time they help reduce our overall level of risk by spreading our money more widely,’ says Miles.

Simple and cost effective
At the moment, the Solent Investment Club portfolio comprises eight holdings, seven of which are funds.
These include the Advance Developing Markets Fund, the Capita Junior Oils Trust and three iShares exchange-traded funds (ETFs).

‘We chose the iShares ETFs as a simple and cost-effective way to invest in markets as diverse as Brazil and Korea, as well as the FTSE 100,’ says Miles.

By investing in iShares FTSE 100, the club has an ETF that aims to track the performance of the FTSE 100 Index as closely as possible, investing in physical index securities.

iShares MSCI Brazil, however, casts its net further afield and aims to track the MSCI Brazil Index, providing exposure to more than 50 diverse large and mid-cap companies in Brazil. iShares MSCI Korea, meanwhile, aims to track the MSCI Korea Index by giving exposure to more than 80 large and mid-cap companies in South Korea.

Both iShares MSCI Brazil and iShares MSCI Korea include a diverse mix of stocks from approximately 85 per cent of their respective markets, and feature all the major industry groups. ‘It provides our club with the ideal way to gain exposure to markets we wouldn’t necessarily usually consider,’ claims Miles.

Spreading investment risk
The club also invests in the SF Adventurous Fund. Ideal for investors with a greater appetite for risk, the fund aims to achieve higher capital growth through a global investment strategy.

The SF Adventurous Fund is one of three funds of funds from The Share Centre’s sister company, Sharefunds, which offers investors the opportunity to spread risk cost effectively by buying into a wide variety of investments.

SF funds cater for three different investment objectives with varying degrees of risk (cautious, positive and adventurous), with no dealing commission, no initial charge and a 1 per cent annual management fee.

With funds offering such a cost-effective way for the Solent Investment Club to diversify its portfolio and reduce risk, would it ever consider going back to investing solely in equities?

‘We’re enjoying much more success with funds than we ever did with equities, so we’re not really interested in going back to individual stocks right now,’ Miles explains.

‘I’d say to any investor looking to diversify their portfolio and lower their overall level of risk that they should consider investing in funds.’