Is it wise to hold individual shares?

A question we are often asked by clients is “Should we keep our share portfolio?”

 In the 1960’s and 70’s it was quite common to buy a basket of blue-chip shares, sit back and enjoy some consistent growth and useful dividends and these portfolios were often passed down through generations. Sadly, the phrase ‘blue-chip’ share is all but gone, with virtually all shares globally seem subject to increased volatility. Even the solid names like BP, M&S, Rolls Royce and Lloyds Bank have had their well-publicised crisis points.

Many employed clients might have the option to purchase their company’s shares at a discount and this can provide some excellent opportunities. One risk to consider however is under-diversification – it’s never smart to put too many of your eggs into one basket. When you invest in the company where you work, your finances are doubly exposed. In the event your employer falters, not only might your investments tumble, but you might also find yourself out of work at the same time. Just ask former employees of Enron and very recently, Credit Suisse, who watched shares in their company plummet, while facing job uncertainty.

Our preference is to encourage clients to ‘manage out’ their shares and this is a method of swapping shares for funds, which we believe are far more appropriate and where the control of risk can be introduced. We may need to manage the process over a number of tax years if Capital Gains Tax is a consideration, but the long-term result is often highly beneficial.

By Philip Harper  |  April 2023