How to make a million – slowly: Lord John Lee’s Isa portfolio has hit £4.5m and now he shares his rules for successful investment
He made the headlines as the first person to become a millionaire through investing his savings in an Isa in 2003. But the astonishing news now is that Lord John Lee’s Isa portfolio has topped £4.5m in value. So he’s a millionaire four times over, and likely heading towards his fifth.
This has come about through just under 30 years of saving and investment. Each year, Lee put the maximum amount allowed into his Isa, and then followed some self-made rules to pick the best investments and make that money grow.
The cash contributions added up to £125,000, and the success of the shares he invested in provided the rest.
It’s worth noting that Lee trained as an accountant and then worked at a Manchester stockbroker for two years, before he started his own business. So he does have a background in numbers. But Lee has cooked up some simple rules for investment which anyone could follow.
We meet in the plush surroundings of a tea room in the Houses of Parliament. He is, of course, fabulously wealthy now, and a Lord to boot – having spent 36 years in Parliament, first as an MP for Pendle in Lancashire and later as a Liberal Democrat peer. But he is well aware of the savings crisis in this country, and is passionate about spreading the word that investment is not to be feared.
Alongside his full list of current investments, here are some of his tips for successful investing.
BE CAUTIOUS, BE PATIENT
“You should keep a certain amount away from the stock market, which I term ‘heart bypass money’. It’s for family emergencies,” he says. “With the rest, by all means invest it. But don’t do it on borrowed money. And play the long game.”
In a word, Lee describes his approach as “conservative”. “I am the complete opposite of those who use the stock market as a casino.” He is always hoping for the “double whammy” of really great appreciation in a company’s share price, and says “you only get that by being patient”.
BUY STOCKS, NOT FUNDS
Lee’s basic principle is to avoid investing in funds, and instead be your own fund manager by selecting shares in good companies. He bought one or two companies a year after doing his research, initially using investment magazines which highlighted experts’ tips. Lee generally invests in smaller-sized businesses with greater potential for share price growth.
He prefers family-run businesses, as he says companies with that kind of stewardship will tend to do better. Although they are becoming rarer these days, he highlights PZ Cussons as one, and he also used to hold Nichols, which is well-known for manufacturing Vimto.
FOCUS ON UK COMPANIES
Lee invests in UK-listed companies as they are more transparent and subject to tighter rules than overseas companies. The only way he has made money out of emerging markets is through UK-listed companies which do business overseas. “I have never been tempted by emerging markets funds. Not because I don’t recognise their potential, but because I prefer to do it through the medium of investing in UK firms with UK corporate governance standards, which are substantially better,” he explains.
ADMIT YOU WERE WRONG
Over the years Lee came to realise the importance of having a stop-loss in place – where an investor decides to sell shares if they have fallen by a certain amount. “I never did have one,” he says. “Had I done so, it would have saved me a lot of money.” Lee now sells out of shares which have fallen by more than 20 per cent.
Although it sounds obvious, it’s something many investors struggle to do as selling shares at a loss is tantamount to admitting you were wrong. “I work on the premise that I should be taking it on the chin and selling,” he adds.
REMEMBER DIVIDENDS
Those few pence per share which companies pay out as dividends each year will all add up, and Lee nearly always invests in companies with a commitment to paying dividends. He never withdrew the payments from his account, preferring to keep them with the savings pile. “The fact is that a decent dividend provides a prop to a share price,” he says.
The current portfolio – worth £4.5m
Anpario
Christie Group
Concurrent Technologies
HML Holdings
Lok n' Store
Vianet Group
Treatt
VP
Charles Taylor
PZ Cussons
Quarto Group
Air Partner
Tarsus Group