Father vs Son 2020-2021

Thought I would compare my son’s 2020 investment performance to mine.

I’m up +16.9%:

He’s up 26.9%.

My son is under 18 and I manage his pension on his behalf. I say ‘manage’, but the reality is I barely think about it. His pot is small and I run a concentrated portfolio based mostly on the shares I own – although this year I made a bold thematic bet, which has worked out well so far. But if everything does go wrong, at least my son has 40-plus years to claw it all back.

This is how his portfolio started 2020:

And this is how it finished 2020:

CNX1 is the iShares FTSE 100 Nasdaq 100 ETF and KLWD is the WisdomTree Cloud Computing ETF.

Between late March and the Autumn, I drip fed the proceeds from the Daejan (DJAN) sale and the portfolio’s existing cash into both of these funds.

I did debate putting the whole lot into CNX1 in late March, but decided upon a less bold approach.

My reasoning for CNX1 was very simple – essentially the world-wide lockdowns would be good (or at least not bad) for IT firms. Case in point: I set up this forum in March and started paying more money to Amazon AWS. I reckoned others would be using more tech services, too. The Nasdaq was (and still is) dominated by the likes of Apple, Amazon, Microsoft, Google etc, so CNX1 seemed a good option.

The KLWD idea came from fundhunter.co (a fund website of which I am a member), and this ETF holds faster-growing tech names such as Slack, Cloudflare and Zoom. I am reasonably familiar with such outfits and so took a punt on this fund, too.

The CNX1 and KLWD investments now combine to represent 32% of my son’s portfolio after performing strongly during the year:

My son’s portfolio and its subsequent performance have caused me to think about how I invest.

I have always been a stock-picker and liked looking at the finer details…

…but these CNX1/KLWD investments were made with no thought other than ‘demand for online services should accelerate because of the pandemic, which should be good for tech stocks’…

…and this guesswork has paid off handsomely. I did spend part of the summer then wondering whether stock-picking was worth it.

“Very early results are uncomfortable for my own stock-picking.”

I may use my son’s pension to dabble with other interesting ETFs with long-term growth themes. But I am not sure what I will do if he continues to earn better returns than me with less effort and perhaps lower risk!

Maynard

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Certainly shows one can also do well with some good thematic investments though 2020 may be an exceptional year. No reason why one can’t pick stocks and combine it with targeted ETFs though I also prefer stock picking myself.

So Maynard you have been dancing with the dark side: speculation! I am ill qualified to comment as I just don’t think that way. I cannot remember thinking even something as obvious as tech will do well out of the pandemic until everybody started saying it and tech stock share prices were soaring.

Maybe that call was big and obvious, the problem with it as a strategy (to my mind) is that things are rarely so obvious so it might be more difficult to find and surf the next big theme.

I see it as managers of companies’ jobs to work out how to navigate the future, and my job to pick the managers with plausible strategies.

That said, I am happy for your son, and am always respectful of people who find other ways of making money in the stockmarket :slight_smile: It’s important to think the unthinkable, that’s how breakthroughs are made.

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Hi Richard

I prefer to use the term ‘intuition’ rather than ‘speculation’ :slight_smile: But yes, I much prefer to consider my investments in a bit more depth normally.

I simply thought that there had to be something worth buying in the crash and felt tech/the Nasdaq was a good gamble in a ‘side’ portfolio. I recall:

  • Launching this forum as a lockdown project during March 2020 and thinking ‘while other businesses are shutting, I am now paying more to AWS’;
  • My wife (then) working at a FTSE 250 finance company that said staff had to work from home and were therefore ordering hundreds of new laptops, and;
  • My brother (then) working as an Amazon delivery driver and saying deliveries had sky-rocketed.

Agreed. The last intuitive call I made was 2007, which worked out albeit for the wrong reasons. So ‘top down’ themes are not my style. But sometimes in those rare market extremes the market is doing one thing while reality is doing another.

Maynard

Time for a 2021 update. I finished the year up +24.5%

Buy my son finished up +25.9%.

So: Father 0 Son 2.

This is how his portfolio started 2021:

And this is how it finished 2021:

(CNX1 is the iShares FTSE 100 Nasdaq 100 ETF and KLWD is the WisdomTree Cloud Computing ETF.)

I ‘manage’ my son’s portfolio and dabbled a little last year. Out went KLWD at £32 (pretty much at last year’s low!) and although this ETF then rallied to £48, the price is now back to £33. I sold because I became unsure about the regular rebalancing the ETF employed. More here :point_down:

I also sold almost 30% of MCON for 113p as I thought there was a better buying opportunity elsewhere. MCON was my son’s third largest holding at the time, and I did not want to trim larger holdings CNX1 (tech diversification) or BVXP (good dividends). MCON has been stuck at 112p ever since.

The KLWD/MCON proceeds all went into SYS1 at an average 217p.

Thankfully SYS1 performed well last year:

SYS1 also contributed the bulk of my son’s 25.9% gain:

For 2022, my son (like me) is in the SYS1 boat but (unlike me) also remains dependent on CNX1. His other holdings represent about half of my holdings. The likely differentiator for 2022 will therefore be CNX1.

Interestingly enough I found this article of mine from 2008 the other day (a lot of old Fool articles were transferred to lovemoney when the company hived off the personal finance division) :

Even though my son has difficulty adding up, he’s got the potential to become a millionaire.

Master P is now four. And like most parents of young children, I’ve received a child trust fund (CTF) voucher. And probably like most parents, that’s all I’ll be putting into a CTF account.

You see, my big problem with CTFs is that the child gets all the money when he or she turns 18. There’s no way I’m putting my cash into a scheme and risk a teenage son blow years of careful compounding on birds, booze and fast cars.

So my personal alternative for long-term child savings is the stakeholder pension. These can be opened in a child’s name and contributions of up to £2,808 per annum can be made on their behalf. In addition, the government currently gives a £22 tax rebate for every £78 payment.

Importantly for me, stakeholders only pay out their benefits when their owners reach 50 (or 55 after 2010). I’m hoping to have taught my son the true value of money by then. In the meantime, he’ll have to earn his own cash to fund the birds, booze and fast cars. He won’t, however, have that many worries about providing for his retirement. This is the millionaire bit.

I’m contributing £100 a month into my son’s stakeholder and the government tops it up to £128. So far at least, the scheme has enjoyed a good start. The tracker fund is up 34% during the past two years and 25 contributions (£2,500 plus £705 tax rebate) to date have earned a decent £483 gain.

By the time Master P turns 18 in 2021, I reckon his pension pot could be worth £54,284 using a 9% average annual return before inflation but after charges (for comparison, the stock market’s average long-term return is 11% a year).

Assuming the same 9% annual growth rate for the following 37 years – and no further contributions – the pot would grow to £1,316,595 by the time when my son gets access to it in 2058.

Sure, you can argue once again about future growth rates, the effect of inflation and so on, but £1m should still represent a large sum in the decades ahead. I just hope I’m around when my son starts to enjoy it.

Well Master P is now 18. Sadly his pot is not worth £54k as I stopped the monthly contributions :roll_eyes: But he is still on for the millionaire’s club with a 9% CAGR for the next 37 years. I might be relying on CNX1 to perform, as I am not sure my stock picking will deliver 9%pa returns for him well into my 80s.

Maynard