I started share portfolios for our two daughters in 1981, when they were aged 5 and 3, following a modest payout from the dissolution of a family trust. I invested £700 for each of them in English China Clays, Rowton Hotels and Friedland Doggart. Thankfully, all delivered profits over time.
Given their ages it was hardly surprising that I didn’t ask their opinions on my selections — but the disappointing thing is that nearly 40 years later their interest is little changed. Over time I have made somewhat halfhearted attempts to engage them in what I was doing and why, but there was little take-up although they were always very appreciative and certainly enjoyed the dividends.
I remember phoning my elder daughter, then about 12, proudly telling her that having just spoken to our brokers, I found her holdings had grown significantly. She replied: “Thanks Dad, well done, keep it up. Can’t talk now — I’m watching a video.”
In retrospect I probably should have done more to try and involve them but I just got on with it, invariably buying the same stocks for them that I was buying for myself.
My concern now, of course, is that there will come a time (hopefully not too soon) when they will either have to take their own decisions or pass control to some form of wealth or asset manager. In either situation they ideally should have much more knowledge, if only to be in a position to sensibly question or understand what that individual is doing or recommending.
I suspect that many readers will be in a similar family situation. Thus I have put pen to paper and have just published a very short primer aimed at teenagers or novices to introduce them to the basics of stock market investment. Called Yummi Yoghurt — A First Taste of Stock Market Investment, it might appeal to parents or grandparents for their offspring or be helpful for school economics groups.
It tells of a farming family who start a business producing yoghurt. This develops into a public company and a family whose teenagers are left money by a grandparent, which they profitably invest in Yummi. My daughters have promised to read it.
Looking back to my own investment life — I bought my first shares as a teenager — I certainly would have found this sort of publication helpful as an adjunct to the building up of my own jigsaw of knowledge from discussions with my late father and the reading of the weekly publications The Stock Exchange Gazette (now defunct) and Investors Chronicle — still very much a bible today. An early explanation of dividend yields, price/earnings ratios and so on, would have been a real boon.
It is partly through my daughters’ portfolios that I have honed my own investment strategy, having seen the rewards of patience, investing in “proper” profitable dividend paying companies and, above all, holding for the long term.
Conscious that it was their money, I eschewed risk — no start-ups, biotechs or exploration stocks. To this list I now add contracting businesses — witness Carillion, Kier and so on.
Of course there have been mistakes and some losses, but thankfully these have been dwarfed by many takeovers and successes. Examples include the aforementioned Friedland Doggart, taken over by MK Electric in 1985 at 320p, compared with our original purchase price in 1981 of 88p.
Others include Breedon, Center Parcs, Countryside Properties, Delcam, Gibbs and Dandy, Parkdean Holidays, Refuge/United Assurance, Trafford Park Estates and, last year, Fenner, which delivered a six-fold return.
Looking at my daughters’ portfolios today I see many examples of where buying and holding paid off in spades. Shares in James Halstead, bought in 1998, have appreciated 27-fold; James Fisher is 18 times up on its 2002 prices, when I bought; and both Clarkson and Provident Financial have appreciated 13-fold apiece.
I am happy, too, to report a recent glimmer of interest. My elder daughter and her husband — like, I suspect, many younger people — have become very environmentally conscious and she made clear to me that she intended to go through her portfolio with an ethical and socially conscious eye.
I confirmed that as it was her money I would certainly carry out her wishes. This resulted in her instructing me to sell any aircraft- or defence-related holdings. Thus I reluctantly sold Air Partner, BBA Aviation and Concurrent Technologies, which is focused on the defence industry.
However, a combination of luck and judgment saw me reinvest the proceeds in Tarsus at 288p and PZ Cussons at 194p. Very soon afterwards Tarsus received a takeover bid for 425p and PZC has risen nicely. So, perhaps father and daughter working together might have produced an even better performance!
John Lee is an active private investor and author of ‘Yummi Yoghurt — A First Taste of Stock Market Investment’, available to buy from July 12. He is a shareholder in all the companies indicated
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