Interactive Investor

DIY Investor Diary: how my ISA and SIPP are invested differently

The latest ii customer to feature in our series explains how and why he is taking more risk with his SIPP compared to his stocks and shares ISA.

14th November 2023 12:48

by Kyle Caldwell from interactive investor

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Buying shares involves more work and effort than outsourcing the investment decision-making process to a fund manager, or following the up and down fortunes of a passively managed index fund or exchange-traded fund (ETF). 

Of course, not everyone who buys shares in individual companies is a forensic accountant. In addition, many investors do not fully understand accounting jargon or every industry valuation measure.

However, this doesn’t mean that you shouldnt buy shares. People choose to do so for many reasons. You might enjoy the intellectual stimulation, or you could be interested in smaller, more speculative companies that aren’t available in funds or investment trusts.

In return for the higher risk that comes with buying individual shares, the potential reward can be higher too. This is a major part of the appeal.

The latest investor to be profiled in our DIY Investor Diary series mainly picks his own shares. He holds around 20 stocks, alongside a couple of ETFs and one active fund, Fundsmith Equity.

This investor, who is in his early 30s and works in the financial services industry, decided to be more active with his savings and investments about two years ago.

He explains: “Beforehand, I simply used my company pension and savings accounts, as I wanted to be sure I could commit sufficient time to properly managing my own portfolio before investing more actively.”

While he had built up knowledge in his line of work, the DIY investor also swotted up further before taking the plunge into the stock market. As well as wanting to take control of his own finances to grow wealth over the long term, he also views investing as a bit of a hobby.

He holds an ISA, SIPP and general investment account with interactive investor. He contributes to his SIPP monthly alongside his employer, and adds lump sums to the ISA and general investment account.

For both ISAs and SIPPs, all income and capital gains on investments grow free of tax. Both offer a wide variety of investment options – shares, funds, investment trusts and ETFs.

However, as ISAs offer much more flexibility, since you can withdraw from them whenever you like, this tax wrapper can be utilised to save towards a specific goal. In contrast, a SIPP is a retirement pot, as money cannot be withdrawn before the age of 55, rising to 57 from 2028.

Due to the difference in when money can be accessed, the DIY investor manages his ISA and SIPP in different ways.

His ISA is more conservative, reflected in the holding of a couple of ETFs and Fundsmith Equity. In contrast, the SIPP is more aggressive, with around 20 positions.

Given the longer-term goals of the SIPP, I take on considerably more risk, investing in single stocks and keeping quite a concentrated portfolio.

“With my ISA, I don’t want to see a lot of volatility. My ISA strategy is to build up sufficient savings to go towards deposits for a house, car or other potential shorter-term goals. As such, I look to preserve capital via diversification by holding funds which contain many stocks. This makes it simpler and more cost effective for when I need to sell the positions in the ISA for these goals.”

To narrow down the universe of thousands of companies that he could potentially invest in, our DIY investor has a couple of stock screeners in place in an attempt to find good value companies with strong margins and strong profit levels. He also looks for potential catalysts to drive share prices higher. As well as looking for certain attributes, he picks up ideas from reading articles and research pieces.

“When I look for new stocks, I generally look to add positions that are different to what is in the portfolio already, so as to keep up diversification. Valuation is key, I want to get value for money.”

Among his holdings are ASML (EURONEXT:ASML), the Dutch company that’s the market-share leader in photolithography systems used in the manufacturing of semiconductors. He also owns shares in MercadoLibre (NASDAQ:MELI), which runs the largest e-commerce marketplace in Latin America.

He has some UK stocks, including a recent new position in Pets at Home (LSE:PETS), but has made a conscious decision to give his portfolio more of an international focus.

“When I started investing, it was scattergun approach, with a number of familiar UK names. I didn’t carry out too much due diligence on each stock. This was not a good strategy, and could have been replicated much easier and more cost effectively by holding a UK-focused fund or ETF.

“I wasn’t sufficiently diversified, and to change that I have been moving to having more of an international portfolio.”

Typically, one or two trades are made each month, with around 30 shares on a watchlist.

His top tip for fellow investors is “not to become too emotionally tied to a holding”.

He adds: “It is important to continually reassess your thoughts, thesis and approach. It is always worth challenging your own perspective. And when things change, don’t be afraid to cut losses.”

Basing investment decisions on emotion and falling in love with stocks are major pitfalls that can prove detrimental to returns. Instead, as he wisely remarks, it is important to “be clear in your investment goals and build your portfolio accordingly”.

He adds: “Large institutional investors and funds have to manage their liquidity risk, making sure the liquidity of the assets they invest in matches the liabilities of their fund.

“Although it’s a bit different when it comes to individual investors, as they are unlikely to hold large enough holdings in a single stock or fund that could be a liquidity issue, it is still important to understand the liabilities (retirement income, saving for a deposit, etc) and having a portfolio of assets which matches those specific goals in a cost-effective manner.”

His views on active versus passive investing is that there’s a place for both. However, overall he prefers to pick his own stocks.

He likes the investment style of Terry Smith of Fundsmith Equity, which is why it is the only active fund he owns.

He describes ETFs as “great tools for investors” that offer a “much easier and much more cost-efficient way to run a diversified portfolio than holding 50-100 single stocks”.

“Additionally, you can get exposure to other asset classes, such as corporate bonds or derivative strategies, which can be interesting portfolio diversifiers,” he points out. 

When buying individual shares, putting in the time and being dedicated are key. Questions to ask yourself and things to bear in mind when buying shares include:

  • How does the business make money? What is the business model?
  • What is its financial position? You will need to read the balance sheet and analyse cash flow
  • Analyse the risks the firm faces to understand if it might be more or less profitable in the future
  • Is now a good time to buy? You need to take into account the various valuation metrics that indicate whether a share is overvalued or undervalued
  • Are you investing for growth, income or both? If you want a certain level of income, you will need to consider whether the company pays dividends, and whether those dividends are sustainable going forwards. This article has plenty of pointers on how to delve into a dividend.

In our DIY Investor Diary series, we speak to interactive investor customers to find out how they invest in funds and investment trusts, what their goals and objectives are, current issues and concerns regarding their portfolio, and what they’ve learned along the way. The premise is to try and provide inspiration for other investors, and we would love to hear from more people who would like to be involved. We do not require those featured to be named. If you are interested, please email our collectives editor directly at:

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Please remember, investment value can go up or down and you could get back less than you invest. If you’re in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.

Important information – SIPPs are aimed at people happy to make their own investment decisions. Investment value can go up or down and you could get back less than you invest. You can normally only access the money from age 55 (57 from 2028). We recommend seeking advice from a suitably qualified financial adviser before making any decisions. Pension and tax rules depend on your circumstances and may change in future.

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