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

“What should I do with money?” is a question that savers ask at any point in their investment journey.

You may be wondering how much cash you should hold, or the most tax-efficient way to save your hard-earned money before you retire, and there are plenty of advisors and fund managers out there happy to offer advice.

But we rarely hear where they put their own money.

We speak with 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 his money.

My property is not an investment

Henry’s day job is taking care of other people’s money, so when it comes to his own money, he wants to keep it as simple as possible.

He says, “I want to do business with as few financial institutions as possible… increasing your income will move the needle much more than running between bank accounts chasing the best interest, especially if you’re young.”

This hands-off approach also applies to his investment portfolio, preferring to “set and forget” rather than worrying about small market movements on a regular basis.

“Resisting the urge to tinker is obviously easier said than done, especially if you’re sitting in front of a market terminal all day,” he says.

What makes Henry different is that he doesn’t view his home as an investment.

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

“I am not experienced or smart enough to develop and flip a property, nor identify an undervalued area and try to generate outperformance by buying there.

‘I’m not very good at odd jobs, I’m not a real estate man. I don’t see real estate as an investment because I always need a place to leave.

“If I’m selling something to buy something more expensive, it’s about whether I can grow my income in the intervening period because then I can borrow more.

“That’s my focus rather than buying a fixer-upper. I have friends who do just that and I wouldn’t discourage them from doing it…but I feel there are easier ways to spend my time.”

Chasing hot stocks is like a fad diet

Henry looks after his clients’ individual portfolios on a daily basis, so he knows how to best manage investments.

But he wasn’t that smart when he first started.

He bought his first property in 2014 and “like many people in their mid to late twenties, that was the main goal financially.”

Then he started putting money aside for retirement and into an Isa “in a pretty modest way” before it picked up during the pandemic.

But even with his years of experience, Henry found himself “a little too focused on trying to find the absolute optimal investment solution, looking for the next hot stock.”

He says, “I think the mistake a lot of people make is jumping straight to the icing on the cake. They could use a lot more time to focus on baking the cake.

“I’m 34 and every conversation I have about finance – and I was exactly the same 10 years ago – is often about ‘what stock tips do you have?’ That’s the icing on the cake.

“What people should be asking is ‘what foundations should I lay?” The temptation for all of us is to jump 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 diet. But we also like the idea of ​​a fad diet so we can skip the line and not have to deal with all the discipline.”

That said, Henry is clear that mistakes are an important learning curve, especially for young, novice investors.

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

He says, “At the time it was very much like gambling. Sports were out of the question, so I think the stock market became a vehicle for that. It wasn’t the kind of thing I was into, but I had a lot of friends who did that kind of thing.

‘Instead of scolding them, I think it’s important that people learn to make mistakes themselves.

‘I didn’t personally do that myself. My personal stuff is generally pretty boring.”

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My pension comes first

Henry divides his money into four main pots: cash, his pension, shares of Isa, and what he calls his “specials” pot.

The idea behind this is purely behavioral.

Can I claim to be the best stock picker in the world? No. But I might do well to be the best.”

Henry admits to being a spender, meaning he chose to run a lower money allotment to avoid getting his hands on it.

He says, “I probably have another three months or so. That’s pretty low… a lot of investors, especially as they approach retirement, probably want a little more cash. Usually between three months and 18 to 24 months is wise.

“I try to take into account the obligations that I expect to have in the next three to six months. I don’t have kids, no big debts coming my way, so I can afford to have a pretty meager cash allotment.”

When it comes to his savings account, he says he needs some friction to keep from moving cash around.

Where Henry invests most of his money is through his retirement and Isa stocks and shares in a “well-diversified basket of global stocks.”

If this sounds like an investment manager, Henry explains that it’s “investments that provide 100 percent access to global stocks, in what I believe are the best companies in the world.”

Even with the best will in the world, it’s hard not to tinker with your portfolio, but Henry says he doesn’t look at the value of his retirement nearly as much as his Isa.

He adds, “If there’s a place for aggressive asset allocation, it’s in retirement.”

‘[But] that is not the only reason why I prioritize my pension as a savings vehicle. Not only is the income tax exemption on contributions really attractive, but given my propensity to buy new golf clubs, the inability to earn my grubby mitts from this money for another 20 years or so also has its perks.”

His main advice? “Just leave it alone.”

I have a special jar for the risky stuff

When he needs to scratch to invest – or even spend – he uses his “specials pot” as behavioral insurance.

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

“I recognize 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 investment or supporting friends who started the business. This is the money he thinks he can afford to take bigger risks.

He says, “If these were zeros, it would sting, but I won’t let that get me executed. This pot amounts to no more than 10 percent of my investable assets (excluding my home), and it also acts as an outlet for behavior.”