Cashing in ISA's

hamer

Hi,
My wife and I have some Scottish Widows, Momentum Income Portfolio Shareclass A Accumulation Isa's taken out March/April 2006.
I am concerned that they have never yet reached their initial value of £7000 each and in the present climate have deteriorated further.
I am thinking of cashing them in and re-investing in a high interest account.
Questions are, is it wise to cash them in yet or should I sit on them for a while longer.
Is there a penalty/admin cost involved for cashing them in.
Where would be the best place to re-invest.
Any suggestions would be appreciated

Thanks.

dunstonh

I am concerned that they have never yet reached their initial value of £7000 each and in the present climate have deteriorated further.
I am thinking of cashing them in and re-investing in a high interest account.

You invest for a term in excess of 5 years because of fluctuations like this.

You are actually poorly invested but not to a level that is bad advice. Your problem was that you saw a tied sales rep at a bank and they dont hold the same investment advice remit that an IFA has. So you dont get proper portfolio planning/investing. You get a random selection of funds at best or all in one fund as this case here.

You are currently invested just 15% in stockmarket and 85% in fixed interest funds. The fund is unclassifed (meaning it has no peers to measure it against) and has barely returned a gain since launch (although 2005 in isolation wasnt bad at just over 8%).

Where would be the best place to re-invest.

You need to decide if you want to invest or save. You have invested at the moment but you say you are thinking about changing it to savings. Historically, investments outperform savings in the long term but in the short term they can underperform.

If you want to stick with investments then there are lots of better options. A switch to a fund supermarket and a spread of 7x£1000 funds (or 6x remaining amount if necessary). That will give you better diversification. You would also have access to whole of market funds. The asset allocation can also be set depending on your risk profile and timescale.

You could also do with a bit more understanding of investments before you make your decision as it may be that you are nervous more due to not understanding how it works more than anything else.

Whatever you decide, I wouldnt have my money in an invesmtent from Lloyds. That is easily changed and at no cost if you DIY or small cost if you go to an IFA. Or to savings if you do decide you dont want risk but accept that inflation will cancel out your interest.

hamer

dunstonh wrote: »

You invest for a term in excess of 5 years because of fluctuations like this.

You are actually poorly invested but not to a level that is bad advice. Your problem was that you saw a tied sales rep at a bank and they dont hold the same investment advice remit that an IFA has. So you dont get proper portfolio planning/investing. You get a random selection of funds at best or all in one fund as this case here.

You are currently invested just 15% in stockmarket and 85% in fixed interest funds. The fund is unclassifed (meaning it has no peers to measure it against) and has barely returned a gain since launch (although 2005 in isolation wasnt bad at just over 8%).



You need to decide if you want to invest or save. You have invested at the moment but you say you are thinking about changing it to savings. Historically, investments outperform savings in the long term but in the short term they can underperform.

If you want to stick with investments then there are lots of better options. A switch to a fund supermarket and a spread of 7x£1000 funds (or 6x remaining amount if necessary). That will give you better diversification. You would also have access to whole of market funds. The asset allocation can also be set depending on your risk profile and timescale.

You could also do with a bit more understanding of investments before you make your decision as it may be that you are nervous more due to not understanding how it works more than anything else.

Whatever you decide, I wouldnt have my money in an invesmtent from Lloyds. That is easily changed and at no cost if you DIY or small cost if you go to an IFA. Or to savings if you do decide you dont want risk but accept that inflation will cancel out your interest.

Thanks for your reply and advice dunstonh.
Your quite right in your suggestion that I need a bit more understandind of investments. Up to a couple of years ago, I didn't really worry about money matters cause I had none , so to speak, this investment being some of my pension lump sum.
I have just been reading the savings info on the forum and I think that I will probably move it to somewhere like Birmingham Midshires as It will gain aprox 5.6% after tax as to the deficit of the last couple of years.

jamesd

hamer, you might usefully look at these funds to see some of the range of what can be held in a stocks and shares ISA:

BlackRock UK Absolute Alpha
Cru Investment Portfolio
Invesco Perpetual Monthly Income Plus
Invesco Perpetual Income
Neptune Global Equity

The chart shows how the volatilities differ (colors are red, blue, yellow, green, gray/top in fund order).

When investing you'd normally pick a selection of funds to hit the desired up and down movement range. Since you're uncomfortable with the current downs you might want to consider using a mixture with quite a high proportion in the first two or three of those or similar funds, since those can be expected to beat cash without large downward value changes in the routine down cycles of the stock market.

It's not too difficult now to come quite close to savings account stability but still do better in growth than a savings account, so it is worth considering sticking with investments in the stocks and shares ISA.

If you wanted to do so, Hargreaves Lansdown is a very popular choice of fund supermarket in which you can hold funds from a wide range of investment suppliers, including those I've mentioned.

JoeShmoe_2

I was in the same position as you about 6 weeks ago. I had some diversified ISA's mostly in UK high income companies

However even basic resrach will tell you the FTSE is in a bear market and headed for 5000 by summers end

http://www.thisismoney.co.uk/small-business/article.html?in_article_id=444243&in_page_id=10&ito=1565

IMHO it will take a long time to recover back up to the 6000 levels where you probably bought. Indeed the FTSE is heading down to levels it was over 10 years ago

Personally I cut my losses, and used the money to pay off a chunk of our mortgage and im glad I did. Personnaly I cant understand people willing to wait 5-10 years in long term investment hoping equities will recovers and watching their investment vanish. Realise you made a small loss, dont wait for it get worse and make it work for you somewhere else

dunstonh

JoeShmoe wrote: »

I was in the same position as you about 6 weeks ago. I had some diversified ISA's mostly in UK high income companies

However even basic resrach will tell you the FTSE is in a bear market and headed for 5000 by summers end

http://www.thisismoney.co.uk/small-business/article.html?in_article_id=444243&in_page_id=10&ito=1565

IMHO it will take a long time to recover back up to the 6000 levels where you probably bought. Indeed the FTSE is heading down to levels it was over 10 years ago

Thats all very interesting but the OP is not invested in the FTSE100 and only has an overall of 15% equity.

Personally I cut my losses, and used the money to pay off a chunk of our mortgage and im glad I did. Personnaly I cant understand people willing to wait 5-10 years in long term investment hoping equities will recovers and watching their investment vanish. Realise you made a small loss, dont wait for it get worse and make it work for you somewhere else

Probably as the returns, despite the down periods, average more savings accounts over the long run. I'm running at just over 13% p.a. having gone through worse periods than this.

If you invested solely in the FTSE100 then that is quite frankly bad investing. Its been a poor index to track for the last 14 years. I recall reading a while back (so it may not be up-to-date any more) that the FTSE100 was the worse performing index of the western economies since 1997.

You say you had equity income. So you should have seen significant gains as equity income has been a very good place to be for many years. A large part of their return comes from dividends which, when reinvested, buy more units which are now cheaper giving you more units. So when the recovery does come at some point in the future it will be these units that turn in the bigger returns.

Perhaps your problem is that you were only invested in medium to medium/high risk funds in a single area and not diversified enough into lower risk areas giving yourself no downside protection.

If you try and time the market as when to go in and when to come out then in the long run you will get it wrong probably more often than when you get it right costing you more than just staying put in the first place.

dunstonh

I had a balanced portfolio with standard low risk UK based funds (i.e. Inv Perp High Inc, CIF European etc) and some foreign based higher risk (i.e. Netwon Oriental, Latin America ) which had done nicely last year but were tanking since the false rally in May.

Inv Perp High income and CIF European are medium/high risk and not low risk. Newton Oriental is high risk and Latin America is very high risk.

he OP doesnt say what his funds are

Yes she/he does. Its in the Scottish Widows Momentum Income Portfolio Shareclass A Accumulation

Q/Is it wise to cash them in yet or should I sit on them for a while longer.
A/ In my opinion you should cash them in now before you lose more. You can always re-invest it when the market hits a bottom. 13 grand at the bottom is more than 10 grand at the bottom - and it IS going lower. As I say I dont understand when people sit and hold, but long term investing (10 years or moe) isnt for me when I think I can get better returns in the short term. In bull markets equities are great for 3-4 year runs

You are telling someone to cash in their investments without knowing what they have got because of the stockmarket yet we know that the OP hardly has any stockmarket content. That is not good advice (or suggestion as advice on the board is not allowed).

JoeShmoe_2

dunstonh wrote: »

Inv Perp High income and CIF European are medium/high risk and not low risk. Newton Oriental is high risk and Latin America is very high risk.

No they are not. InvPerp is Low http://www.iii.co.uk/factsheets/?type=detail&mex=PPHIA, Newton is medium http://www.iii.co.uk/factsheets/?type=detail&mex=RCOO

The only high risk I had was Latin America. Between us my wife and I had 3 low risk, 2 medium and 1 high.

dunstonh wrote: »

Yes she/he does. Its in the Scottish Widows Momentum Income Portfolio Shareclass A Accumulation

Looking at the fund breakdown http://finance.google.co.uk/finance?q=MUTF_GB:GB00B01ZDS23 it seems it primarily invests in fixed inerest rate bonds although it seems 30-40% is in equities hence the large pice drop since May

dunstonh wrote: »

You are telling someone to cash in their investments without knowing what they have got because of the stockmarket yet we know that the OP hardly has any stockmarket content. That is not good advice (or suggestion as advice on the board is not allowed).

Well he/she asked for an opinion and I gave mine. As always they should do their own DD and consult a finanical adviser before making any decisions

hamer

Thanks for your comments guys, or girls. It seems like I've stuck a stick in a bee hive.
You will appreciate how difficult it is for the layman in understanding the investment/savings minefield as it seems that both you experts agree to differ.
I reiterate that I don't understand how the markets work however, I can understand simple interest. I don't have the amount of money to gamble on whats going to happen 5-10 years down the line especially in this downward trend. I am leaning towards JoeSmoe's way of thinking of cutting my losses and cashing them in.
Next Question- Whats the procedure to cash them in.

Thanks again.

JoeShmoe_2

Hamer

When I cashed mine in (with Edward Jones) I was told there were no sale commissions to pay, merely a cancellation fee. Mine was only 40 odd quid. Best to phone your provider and check but it wont be much

dunstonh

No they are not. InvPerp is Low http://www.iii.co.uk/factsheets/?type=detail&mex=PPHIA, Newton is medium http://www.iii.co.uk/factsheets/?type=detail&mex=RCOO

The only high risk I had was Latin America. Between us my wife and I had 3 low risk, 2 medium and 1 high.

No. You are wrong and I am right. Look up morningstar or trustnet and most other independent sources and you will see the real ratings. To even think that a virtually 100% equity fund could be low risk is just plain wrong. Especially Inc Perp High Income which is one of the highest risk funds in its own sector. IIRC, the FT fund rankings are not relative to cash and they only have a limited range. They are not a good guide to risk.

Looking at the fund breakdown http://finance.google.co.uk/finance?...B:GB00B01ZDS23 it seems it primarily invests in fixed inerest rate bonds although it seems 30-40% is in equities hence the large pice drop since May

That data isnt as up to date as what I have available but even that link shows 16.37% equity content. Not 30-40% as you say.

I reiterate that I don't understand how the markets work

You dont need to. Although as I said, you only have 15% invested in the markets in that fund.

I don't have the amount of money to gamble on whats going to happen 5-10 years down the line especially in this downward trend.

If you were invested more in equities then that would matter. Its a bit like saying that you wont buy apples because you dont like the flavour of grapes.

I am leaning towards JoeSmoe's way of thinking of cutting my losses and cashing them in.

If the markets concern you then why not go 100% non equity until you feel ready to dip back in. At least you keep the ISA status that way?

However, making a financial decision on the flawed information posted by Joe is not the way to do things.