Quilter’s David Henry reveals where he invests his own cash

‘What should I do with money?’ is a question asked by savers at every point in their investment journey.

You might wonder how much cash to keep, or the most tax-efficient way to save your hard-earned money before retirement, and there are plenty of advisers and fund managers, who are keen to dish out advice.

But we very rarely hear where they put their own money.

We speak to David Henry, investment manager at Quilter, who reveals his approach to saving, some of his biggest mistakes as an investor and how he avoids spending all of his cash. 

Quilter’s David Henry spends his day telling people where to put their money – but where does he invest? 

My property isn’t an investment

Henry’s day job is looking after other people’s money so when it comes to his own he wants to keep it as simple as possible.

He says: ‘I want to deal with as few financial institutions as possible… increasing your earnings is going to move the needle way more than running around switching bank accounts to chase the best rate of interest, particularly when you’re young.’

This hands-off approach applies to his investment portfolio too, preferring to ‘set and forget’ rather than agonising over small market movements on a regular basis.

‘Resisting the urge to tinker is easier said than done of course, particularly when you sit in front of a market terminal all day’, he says.

Where Henry differs is that he doesn’t view his home as an investment.

‘I know a lot of people do, and that’s fine, but I personally view buying a home as consumption. 

‘I’m not experienced or clever enough to develop a property and flip it, nor identify an undervalued area and try to generate some outperformance by buying there.

‘I’m not very good at DIY, I’m not a property guy. I don’t think of property as an investment because I’m always going to need somewhere to leave.

‘If I’m selling something to buy something more expensive, what matters is my ability to grow my earnings in the intervening period because it means I can borrow more.

‘That’s my focus rather than buying a fixer-upper. I’ve got friends who do exactly that and I wouldn’t discourage them from doing it… but my view is that there are easier ways for me to spend my time.’

Going after hot stocks is like a fad diet

Henry looks after his clients’ individual portfolios on a day-to-day basis, so he is well versed in how best to manage investments. 

But he wasn’t so savvy when he first started out.

He bought his first property in 2014 and ‘like a lot of people in their mid to late 20s that was the number one objective financially.’

Then he started putting money away for his pension and into an Isa ‘in a fairly modest way’ before it picked up slightly during the pandemic.

But even with his years of experience, Henry found himself ‘a little bit too focused on trying to get the absolute optimum investment solution, looking for the next hot stock.

He says: ‘I think the mistake a lot of people make is they jump immediately to the cherry on top of the icing on the cake. They could do with a lot more time focusing on baking the cake.

‘I’m 34 and any conversation that I have around finance – and I was exactly the same 10 years ago – often involves ‘what stock tips do you have?’ That is the cherry on top of the icing.

‘What people should be asking is ‘what foundations should I be putting in place?’ The temptation for us all is to skip ahead and try to take the path of least resistance to financial freedom.

‘People wanting stock tips is a bit like a fad diet. We all know how to lose weight – exercise and eat property. But we also like the idea of a fad diet so we can skip the queue and not have to deal with all the discipline stuff.’

That said, Henry is clear mistakes are an important learning curve, particularly for young, first-time investors.

Henry’s friends, like plenty of others, became interested in day trading during the pandemic.

He says: ‘At that stage it was very much like gambling. Sports weren’t on, so I think the stock market became a vehicle for some of that. It wasn’t the sort of thing I was into but I had lots of friends that were doing that sort of thing.

‘Rather than scold them, I think it’s important for people to learn to make mistakes themselves.

‘I wasn’t doing any of that myself personally. My personal stuff is, by and large, pretty boring.’

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My pension is a priority

Henry splits his cash between four main pots: cash, his pension, a stocks and shares Isa and what he calls his ‘specials’ pot.

The thinking behind this is purely a behavioural one.

‘Can I claim to be the best stock picker in the world? No. But I can have a right good go at being the best behaved.’

Henry admits he’s a spender, which means he has chosen to run a lower cash allocation to avoid getting his hands on it.

He says: ‘I’ve probably got about three months worth. That is quite low… a lot of investors, particularly as they approach retirement, probably want to have a little bit more of a cash allocation. Typically between three months and 18 to 24 months is sensible.

‘I try to take account of what liabilities I expect will be coming in over the next three to six months. I don’t have children, there’s no major liabilities coming down the road for me, so I can afford to run quite a skinny cash allocation.’

When it comes to is savings account, he says he needs a bit of friction to avoid being able to move cash around.

Where Henry invests most of his money is via his pension and a stocks and shares Isa into a ‘well-diversified basket of global equities.’

If this sounds like investment manager speak, Henry explains it’s ‘investments that are 100 per cent access to global equities, in what I think the best companies in the world.’

Even with the best will in the world, it’s difficult to avoid tinkering with your portfolio, but Henry says he doesn’t look at the value of his pension anywhere near as often as his Isa.

He adds: ‘If there is a place to have an aggressive asset allocation it’s in your pension.’

‘[But] that’s not the only reason I prioritise my pension as a savings vehicle. Not only is the income tax relief on contributions really attractive but, given my propensity to buy new golf clubs, the inability to get my grubby mitts on this money for twenty years or so has its benefits too.’

His key piece of advice? ‘Just leave it alone.’

I’ve got a specials pot for the risky stuff 

When he needs to scratch that itch to invest – or indeed spend – he uses his ‘specials pot’ as a behavioural insurance policy.

He says: ‘One of the occupational hazards of this job is the compulsion to always feel the need to ‘do something’. When I’m tempted to try to market time, day trade individual stocks or do anything outside of my core competency I do it here. 

‘I recognise that I will sometimes be compelled to do these things, and if I can scratch that itch while leaving the sensibly invested main pots alone, then that’s a net positive in my opinion.’

This also includes any EIS investments or supporting friends who have started the business. This is the money that he feels he can afford to take bigger risks on.

He says: ‘If these are zeroes, it would sting, but I’m not going to get carried out as a consequence. This pot amounts to no more than 10 per cent of my investable assets (excluding my home), and it also acts as a behavioural release valve.’

This post first appeared on Dailymail.co.uk