Woodford's way: The path to market success

The Invesco chief has a winning investment formula that he has stuck to, ignoring temporary crazes such as dotcom

Neil Woodford, the manager of the Invesco Perpetual High Income fund, is celebrating 25 years in the job. You may think, so what? But if you have money in a private pension or in a fund of funds it's fairly likely that a portion of it is invested in Mr Woodford's massive fund.

He has a very simple philosophy: buy sound, high-yielding companies and hold them at the core to give a good base of regular dividend growth of the fund, while exploring smaller firms – he has up to 20 smaller companies in his portfolio – to add a little spice at the edges.

And Mr Woodford's formula, which is one I would recommend to any private investor looking to construct a solid long-term portfolio, pays dividends, quite literally.

He is a major figure in the world of investment and other fund managers sit up and notice when he takes a stake in a company. The thinking is "what has he seen and what are we missing?" It's a huge compliment to Mr Woodford and the soundness of his long-term judgement.

Sadly, trying to get an interview with Mr Woodford is notoriously difficult. I have put in plenty of requests in recent years and been rebuffed each time. Presumably, he prefers to let the numbers do the talking and that's fair enough. But it hasn't always been the case.

Back at the tail of the dotcom boom in 1999, I took a private investor to meet Mr Woodford, to later write up for a magazine. Mr Woodford was engaging, interesting and passionate about his investment ethos. He was also, according to some prominent observers (many of whom now hold him up as a doyen), in real trouble.

His fund was languishing near the bottom of the performance tables because he didn't want to get involved in dotcom companies (remember this was 1999 when such companies with a turnover smaller than a public house would have mad market capitalisations in the hundreds of millions).

He was seemingly missing out on massive capital growth opportunities in favour of boring old-fashioned companies, such as pharmaceuticals and oil, which were real laggards in the index. The result of the meeting was that the worried investor, who had been considering selling his stake, put more into Mr Woodford's fund.

When the dotcom bubble burst a few months later that looked like a very wise investment, and that is still the case 13 years later. There is no such thing as a sure thing in investment or fund management but with growth of 292 per cent over the past 10 years, while the wider stockmarket is still lower than in 1999, Neil Woodford's record looks pretty damned close.

Fair deals on retirement

The news that the Financial Services Authority is to investigate the annuity market in the UK is welcome but long, long overdue.

When insurers were legally required to let their pension savers know of the open market option for 2002, barely half the job was done. Since then the FSA has largely sat on its hands over this crucial area of our personal finances.

Some insurers have tried every marketing trick in the book to encourage people to simply sign up to the annuity they are offering when it's time to cash in a pension pot.

One of the most common tactics has been to simply write to an individual and say that the pension pot is valued at x and if you'd like an income of y to start next month then sign on the dotted line. Faced with this type of letter the majority do sign and potentially lose thousands as a result.

There is, currently, no indication in those letters that if the pensioner has a chronic medical condition then it's very likely he or she can find a much better annuity elsewhere. Nor are there genuine health warnings on the dangers of signing up to an annuity that doesn't rise with inflation.

Now, from next month, a code of conduct is coming into force from the Association of British Insurers meant to make the process of buying an annuity a little fairer. However, I firmly believe that this will not be enough and that people will still be signing up to annuities which are unsuitable to them.

One way that the whole problem could be cut at the root and ensure fairness would be to simply ban insurance companies from selling annuities to their own pension savers. Enforced shopping around, if you like.

Now the Government is in favour of compulsion for our own good in the realm of workplace pensions, a little bit here would benefit the retirement wealth of the country hugely. In fact it has been estimated that retirement incomes could be boosted by £7bn if everyone shopped around.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Suggested Topics
News
people
News
A boy holds a chick during the Russian National Agricultural Exhibition Golden Autumn 2014 in Moscow on October 9, 2014.
news
Life and Style
love + sex
Sport
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle v United 1 player ratings
Arts and Entertainment
Victoria Wood, Kayvan Novak, Alexa Chung, Chris Moyles
tvReview: No soggy bottoms, but plenty of other baking disasters on The Great Comic Relief Bake Off
Sport
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle 0 Man United 1: Last minute strike seals precious victory
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
Arts and Entertainment
Seth Rogan is one of America’s most famous pot smokers
filmAmy Pascal resigned after her personal emails were leaked following a cyber-attack sparked by the actor's film The Interview
News
Benjamin Netanyahu and his cartoon bomb – the Israeli PM shows his ‘evidence’
people
Arts and Entertainment
80s trailblazer: comedian Tracey Ullman
tv
News
i100
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Graduate Application Support Analyst

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Reach Volunteering: External Finance Trustee Needed!

    Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

    Christine McCleave: FP&A Analyst

    £36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

    Recruitment Genius: Sales Executive - OTE £40,000

    £15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

    Day In a Page

    War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

    Baghdad fights to win back Tikrit from Isis – but then what?

    Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
    Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

    What is it like to live with Alzheimer's?

    Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
    The Internet of Things: Meet the British salesman who gave real-world items a virtual life

    Setting in motion the Internet of Things

    British salesman Kevin Ashton gave real-world items a virtual life
    Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

    Election 2015: A dead heat between Mr Bean and Dick Dastardly!

    Lord Ashcroft reveals latest polling – and which character voters associate with each leader
    Audiences queue up for 'true stories told live' as cult competition The Moth goes global

    Cult competition The Moth goes global

    The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
    Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

    Pakistani women come out fighting

    Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
    Leonora Carrington transcended her stolid background to become an avant garde star

    Surreal deal: Leonora Carrington

    The artist transcended her stolid background to become an avant garde star
    LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

    Education: LGBT History Month

    Pupils have been discussing topics from Sappho to same-sex marriage
    11 best gel eyeliners

    Go bold this season: 11 best gel eyeliners

    Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
    Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

    Cricket World Cup runs riot to make the event more hit than miss...

    The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
    Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

    Katarina Johnson-Thompson: Ready to jump at first major title

    After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot