TONY HAZELL: How I’m getting my retirement pot back on track

Well, that was awful wasn’t it? I’ve been investing for more than 30 years and 2022 will go down as one of the most unremittingly miserable I can recall.

The pain was intensified because, being at retirement age, I had far more invested than in some previous stock market downturns such as 2008 and the early 2000s. 

Although 2020 was bad, the cause — Covid — felt transient, so I was hopeful of better times.

A year to forget: Tony Hazell suffered one of his worst ever years for investing in 2023 with tens of thousands of pounds wiped from his portfolio

I reluctantly scrutinised my investments over the Christmas holiday period, totalling up some eye-watering losses.

I briefly contemplated what we could have done with the tens of thousands of pounds wiped from our investments. 

An Antarctic cruise perhaps? The home improvements Mrs H regularly alludes to as her ‘rolling five-year plan’? A Tesla to flaunt to the neighbours?

Ironically, the pain was intensified for investors like me who hold a globally diverse portfolio.

The FTSE 100 index — boosted by many companies counting earnings in the powerful dollar — finished 2022 about where it started. Throw in dividends of about 3.5 per cent and those who stuck with Big UK plc did OK.

Look more widely and the picture ranged from ugly to gruesome. The American S&P 500 fell by 20 per cent, the more technology-based Nasdaq fell by a third and the FTSE 250 covering medium-sized UK companies fell 12 per cent.

The optimist in me notes that it is unusual — though by no means without precedent — for stock markets to fall for two consecutive years and bad years can be followed by energetic bounce-backs.

Looking at the U.S. S&P 500 index, it is two decades since it suffered multi-year losses, from 2000 to 2002 when the crash saw it lose 43 per cent of its value. Ouch!

Previous multi-year losses were associated with World War II and the Great Depression.

As investors, it is reasonable to ask how these times compare.

We are facing recession, which many economists now believe will be slight, so are a long way from depression.

There is a war in Europe which has had an impact on energy prices, but these are falling. Covid is still affecting trade and supply chains. China is opening up in travel terms while remaining politically shrouded.

Inflation is high, but the Bank of England says it should start to fall rapidly from the middle of this year. Interest rates have further to rise, but seem unlikely to hit the peaks pessimists were predicting last autumn.

Blue chips: The FTSE 100 index finished 2022 about where it started. Throw in dividends of about 3.5% and those who stuck with Big UK plc did OK

Blue chips: The FTSE 100 index finished 2022 about where it started. Throw in dividends of about 3.5% and those who stuck with Big UK plc did OK

Taking everything into account, I remain a committed stock market investor because I believe it offers the only route to getting sufficient returns to maintain our standard of living, providing holidays and family fun over the longer term.

Barclays publishes a report to professionals called the Equity Gilt Study, which compares returns on various assets. This shows that over longer periods shares have tended to beat cash.

That’s not to say I would plunge every penny into the stock market. I still keep around a quarter of our savings in cash.

On this front I became a lot more active in the autumn as panicked markets sent interest rates whizzing up.

I fixed most of our cash Isa money at 4.4 per cent for three years with Coventry Building Society. I reckon this could be beating inflation by this time next year. 

On easy-access savings, I’m earning 2.42 per cent with Investec while Mrs H’s Marcus account pays 2.5 per cent.

Leaving money in a bank current account paying nothing seems foolish so we are keeping our balances very low.

But I’m guessing you want to hear about my investment disasters, so here goes.

My biggest 2022 losses in percentage terms came from the Scottish Mortgage investment trust, whose price fell 45 per cent largely due to tech heavy investments and some bad calls on China.

I sold some shares early in the year, but then made the fundamental error of believing the fund had hit rock bottom so bought some back.

Positive signs: The Bank of England says inflation should start to fall rapidly from the middle of this year

Positive signs: The Bank of England says inflation should start to fall rapidly from the middle of this year

The shares rose briefly, but later fell again. Overall, I lost 27 per cent of my investment.

RIT Capital Partners, which had delivered some great returns, previously fell by 21 per cent last year. 

This fund claims to aim for capital preservation, but its portfolio is increasingly based on unquoted stocks, which brings unpleasant echoes of Neil Woodford. I am looking very closely at this investment because it may no longer suit my aims.

On the brighter side, my decision to seek safety with the giant Foreign & Colonial investment trust appears to have been vindicated as it has held its value.

There have been bright spots. I bought shares in Blackrock World Mining Trust in the spring and these made 11 pc for me last year.

Mind you, if I had bought them at the start of last year I could have made 26 per cent.

Elsewhere, Fidelity’s Special Situations fund held its value, as did its European and Global Dividend funds. But in line with global investment conditions its Emerging Markets fund fell a stomach-churning 24 per cent.

Another lesson from the Barclays Equity Gilt Study is that U.S. stock markets tend to outperform the UK.

Experience has taught me that finding a U.S. fund to beat the market consistently is next to impossible so I use a cheap tracker, the HSBC S&P 500 UCITS ETF, which has an ongoing charge of 0.09 per cent. 

Its price fell 9.1 per cent last year after rising 30.9 per cent in 2021. It has made an average 11.33 per cent a year over the past five years.

Similarly, as a basis for broader global investment I use two cheap Vanguard funds — Global Equity and FTSE Developed World ex‑UK Equity Index Fund.

Global Equity lost 7.6 per cent in 2022, but has returned an average 7.9 per cent a year over five years. Developed World lost 8.3 per cent in 2022, but returned an average 8.56 per cent a year over five years.

Finally, I feel compelled to reveal that the biggest investment smile of 2022 is worn by Mrs H. She had been urging me to buy Fevertree shares for her portfolio.

In the spring she took the plunge, after the price had fallen heavily, and she is sitting on a profit of 17 per cent. Sometimes timing can be helpful.

The other lesson we learned from 2022 is how important it is to use your money rather than leave it all invested. Last year, we were able to help stepson No 1 and his wife with a house deposit after helping stepson No 2 previously.

Seeing them settled in a lovely family home has given us a much warmer feeling than any Antarctic cruise ever could.