Choose investment lifestyle to suit you and enhance savings

Alcohol, cosmetics, defence, fashion, gambling, jewellery and tobacco are major industries but they are generally detested by many environmentalists.

Yet following your own or aspirational lifestyle might be the best savings route you have never considered. The products and services that you use could be the key to better returns.

Ethical and environmental are two of the buzz words in the world of finance. They occupy mountains of column inches in the press. Financial advisers are even expected to carry out a personal enquiry as to a client's approach to ethical investing before recommending appropriate action.

Funds that follow such a dictum are severely restricted as to where they can place money. Not surprisingly, their performance is often lacklustre.

F&C – regarded as the pioneer in this field – achieved 11.3 per cent growth over three years and 23 per cent over five for its Stewardship International fund.

Over three years, it lost 8.7 per cent and 10.3 per cent in its Stewardship Growth and Stewardship Income funds, according to research by Lipper.

Instead consider creating your own portfolio of shares that ethical managers are usually prevented from buying. The results could be quite different and if held in either an ISA or SIPP can give good long-term tax advantages.

If you need specific advice, contact a reliable stockbroker like Brewin Dolphin, Charles Stanley or Redmayne Bentley, all of whom have Yorkshire offices. For execution only, contact The Share Centre, Garrison Investment Analysis or Torquil Clark.

Give your choices time to perform. Taking a five-year view, the following data – which includes dividends – was specially prepared for the Yorkshire Post by Morningstar, and clearly shows the growth that can be achieved. Less frequent trading will reduce commission and related costs.

Some excellent 'lifestyle' companies are quoted on major non-UK exchanges, often New York and Paris. The small additional expense should not be a disincentive to acquire them. They can be held in a nominee name with your broker.

Start by considering alcohol. Diageo is the world's largest drinks company with such key brands as Johnnie Walker Scotch, Captain Morgan rum and Smirnoff vodka. Its prospects in emerging markets look strong, given the number of aspiring middle-class consumers for international premium spirits. It rose 69 per cent.

If beer is preferred, Heineken has grown by 81.5 per cent. Although Dutch, Heineken is the largest brewer in the UK following its takeover of Scottish & Newcastle in 2008. Its brands include Foster's lager and Strongbow cider.

Majestic Wine is a major independent wine retailer and has been listed on the Alternative Investment Market (AIM) for many years. It jumped 70 per cent in the period reviewed.

Whitbread, which rose 66.6 per cent, sold its breweries a decade ago and today its holdings include Beefeater, Costa Coffee (the largest coffee shop operator in Britain with 1,100 outlets) and Premier Inns.

Pawnbroking is a lucrative field to judge by 119 per cent growth from Albemarle & Bond. It purchased rival Herbert Brown some years ago and is expanding with 25 new stores planned for this year.

Jewellery sparkles even in an economic downturn. Theo Fennell, whose clients include David Beckham and Sir Elton John, rose 65 per cent. Fennell's new silver range starts at 75, which has been launched in part as a response to the rising cost of gold.

Tobacco is anathema to ethical funds. They are missing out on some major success stories such as British American Tobacco which rose over 135 per cent. It is the world's second largest cigarette maker with brands like Dunhill, Kent and Lucky Strike. It pays a dividend exceeding four per cent and has good distribution in emerging states.

Cosmetics seem to withstand the economic storms to judge by the sparkling return of over 182 per cent from Estee Lauder. The UK is among its top performing markets, often boosted by brands like Creme de la Mer at airports.

Leonard Lauder, son of the company founder, said that lipstick sales rise during a recession as women reduce expenditure on more expensive wardrobe purchases but still wish to improve their appearances.

L'Oreal, the world's largest cosmetics maker, returned 75.7 per cent, boosted by Yves Saint Laurent and Lancome.

Fashion is often disregarded by ethical funds as there can be question marks over production policies.

Yet there are great names which should not be tarnished. Burberry – up 197 per cent – is probably the largest British brand to make its mark abroad. With new branches opening in Brazil, China and India, the label under chief executive Angela Ahrendts has become a global success.

Mulberry – noted for its fashionable bags – has returned 464 per cent growth for investors. Established in a garage in Somerset in the 1970s, Mulberry has become the hip accessory for most stars and is expanding overseas at a rapid rate.

The world's top luxury group is LVMH (Louis Vuitton Moet Hennessy).

From Vuitton handbags sold in 64 countries – the first luxury name in China – and perfumes like Christian Dior and Givenchy to Champagne brands like Dom Perignon, the company has built up an enviable reputation. It is up 114.8 per cent and recently acquired an important stake in Hermes.

At another end of the spectrum, Stoke pottery maker Portmeirion continues to surprise and is well placed to gain from creating royal wedding items this year.

It bought Spode and Royal Worcester from their administrators two years ago. Such foresight has produced 262 per cent growth.

In transport, Rolls Royce is the obvious lifestyle name, rising 50 per cent. Charles Stanley stockbrokers like its "strong performance over the past year" but warns of its premium rating.

RR recently won an order worth US$1.2bn from China Eastern Airlines for engines to power 16 Airbus A330 aircraft.

Defence is a non-starter for the ethical lobby. For those concerned to protect our islands, a firm like Serco Defence, Science & Nuclear deserves support and investors received over 91 per cent over the past five years in return.

Finally, if you feel like a celebration with your portfolio, invest in The Restaurant Group, owners of Garfunkel's and the Frankie & Benny's chains, as well as Chiquito and Brunning. With a relatively low 11 spend per head, it is insulated for a tough economic year. It is up over 90 per cent.

Those who invest in lifestyle stocks can generously support their favourite charities with some of their successful gains.

Core holdings

Sector Company 5 year growth per cent

Alcohol

Diageo 69.4

Heineken 81.5

Cosmetics

Estee Lauder 182.3

Defence

Serco 91.4

Fashion

Burberry 196.9

Mulberry 463.7

Jewellery

Theo Fennell 65.0

Luxury

LVMH 114.8

Pawnbroking

Albemarle & Bond 119.3

Tobacco

BAT 135.4

Source: Growth statistics provided by Morningstar

Back to the top of the page