Who would buy shares in an airline with a grounded fleet? Me, that’s who

Linda J. Dodson

Funds versus shares

So what horse have I gambled The Boy’s future on? The bulk is being used to buy units in a “tracker” fund run by American firm Vanguard. Vanguard’s late founder Jack Bogle is known as the godfather of index investing, that is the principle that it is a better idea to mirror the make-up of a given stock market, rather than try and trade in and out of individual stocks.

In theory, funds of this ilk avoid human fallibility and, because they are so cheap (Vanguard’s range is 0.22pc a year – that’s 11 quid a year if you have £5,000) you get to keep more of the returns than a traditional managed fund.

It is normally recommend that the amount of risk you take is inversely proportional to your age, so a baby should be at the top of the rollercoaster and your nan on a pedallo. Consequently I picked Vanguard LifeStrategy 100, meaning 100pc of the fund is allocated to stocks (as opposed to bonds) which is more likely to generate higher returns over the 16 years it will be tied up for.

Now index funds are the sensible choice – but I want a bit of excitement, too.

So after a little windfall I decided to spend a few hundred pounds on a single share. Now this is clearly a high-risk strategy. You have to be prepared to read financial accounts and follow news reports that could have an influence on the long-term price of the share. Heading into a recession, you must be certain you will won’t need the cash and be a forced seller when the markets are in the depths of despair.

I was seduced by the sudden share price drops as the pandemic ushered in a global lockdown. Travel companies and airlines were understandably among the worst hit, meaning if and when there was a rebound, they should recover strongly. I plumped for easyJet, reasoning that its low-cost fares would be more popular when flights do resume and that it is a better financial position that British Airways owner IAG, which is saddled with an enormous legacy pension fund.

Before the plunge, easyJet shares were at £15, I bought in early April at around £6.50 – at yesterday’s market close they’re back up to £7.24. The carrier says it expects 75pc of flights to be running by August. But there’s also the ongoing saga of its founder and largest shareholder Sir Stelios Haji-Ioannou’s battle with the board.

I’m expecting turbulence for the next few months rather than clear skies. I hope my stomach can take it, and The Boy’s appreciates it. Speaking of which, I never said how he did in the chocolate challenge. He neither ate, not waited, but ran after me crying. What does that say about my parenting? 

The Telegraph’s internal guidelines prevent journalists from writing about stocks for 30 days before or after buying or selling shares.

Have a question or comment about parental finances? Email me: [email protected]

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