S&S ISA'S Are they worth it?

Rich1976

I have just bought a copy of What investment Magazine which I buy occasionally for the fund performance tables.

Having been an ISA Investor for 5 years I was horrified to see that a £100 investment in the avaerage UK all Companies fund is now worth only £132.99! And this is after 10 years!

One of the funds I hold is the Fidelity Moneybuilder UK Index fund and every £100 invested has grown to £163.25 over 5 years and £130.94 over 10 years.

The 5 year figure is quite good but the 10 year one is appalling and surely an investor would have done better if they'd left the money in a cash ISA.

Looking at the performance of the long term Global Growth and American fund figures and these are just as dismal. Only European funds appear to have done well.

Is it just me or are other people worried that investing in the stockmarket for the long term may not be producing the returns that make it worthwhile. I know past performance is no guarantee etc but the way the world's economies are at present makes me wonder if we've seen the last of the great days of investing.

dunstonh

urely an investor would have done better if they'd left the money in a cash ISA.

Thats because you are measuring a high point to a low point and only looking at one sector. Proper investing is done over multiple sectors and at different times they will perform better than others.

Plus the figures you see do not take into account any portfolio rebalancing.

Is it just me or are other people worried that investing in the stockmarket for the long term may not be producing the returns that make it worthwhile.

Nope. In a 5 year period you would expect at least one major downturn. So, in a 10 year period you would expect 2. The timing of those figures you see reflects two major downturns.

the way the world's economies are at present makes me wonder if we've seen the last of the great days of investing.

I take it that you are quite young and have never experienced bad times. Things happening at present are mild compared to what happened in the 90s, 80s and 70s. Then think about WWII and how bad that was. People have just got used to very good times and a slowdown (which is all it is so far) has got people thinking its the end of the world. There is always opportunity and options.

MrBeans

Investing is stock markets is risky. What the word means is that you can lose your money. Who's to say there won't be another 1929/1930s stock market crash? Or natural disaster that decimates share prices? Equally, who's to say share prices won't double in the next 3 years? That is what risk means - risk on the upside and the downside.

My personal preference has always been to invest by regular monthly amounts rather than in a lump sum. I had some cash at the end of 2007 and rather than invest it all in one go I am investing it monthly over 2 years. That way you'll probably buy when shares are cheap as well as when they are expensive. Of course, if you are smart, you invest all your money when shares are down - but if you knew when they were down and not going even further down you'd almost by definition be rich!

All one can say is that in the past, over the long term, investing in shares has been better than investing in cash. But there's no guarantee that will be true in the future. I think it will be true in the future and back my opinion with my money. Ask me in 20 years if I was right!

Lee_Hunter

Whilst on the subject of poor performing Stocks and Shares ISAs. My parents recently found out that their Halifax S&S ISA has lost every penny invested since January!! They have only discovered this as they get a 6-monthly statement - should the Halifax have informed them earlier of the losses and where do they stand legally?

dunstonh

should the Halifax have informed them earlier of the losses and where do they stand legally?

The Halifax have no requirement to provide them anything other than a statement. There has been a 20% stockmarket drop so a short term loss is not unexpected.

Where they invest and how they review it is down to them or their IFA (assuming they agree a servicing arrangement). They havent used an IFA but a tied sales rep which means your parents decide where to invest.

Halifax, like all the banks, have poor quality investment funds so if they are not up to investing it themselves, they should get in contact with an IFA.

MrBeans

Lee_Hunter wrote: »

Whilst on the subject of poor performing Stocks and Shares ISAs. My parents recently found out that their Halifax S&S ISA has lost every penny invested since January!! They have only discovered this as they get a 6-monthly statement - should the Halifax have informed them earlier of the losses and where do they stand legally?

How has it done since it started? In other words, how much have they put in in total and what is the ISA now worth in total? If they have not been putting money in for long the chances are they have lost money overall. If it has been going for ages chances are they have made a profit overall.

Looking at statements of stocks and shares based investments can be depressing at the monent because markets have fallen so much. One hopes they will rise again at some point.

It sounds as if your parents are making regular monthly payments into the ISA? If so look on the bright side - they are now buying when prices are cheap. Though the risk is they will get even cheaper...

Which fund is the ISA invested in? As dunstonh says some of the bank funds, sometimes called bonds, are shamefully bad investments: charges are high and/or you don't get any of the dividends from the underlying shares in which the fund is invested and/or you don't get 100% of the gain of the underlying stocks and shares. However, your parents might be in a good fund. Some advice, either here or as dunstonh suggets via an independent IFA could result in a switch to a better fund.

jamesd

Lee Hunter, what investments did your parents select within the ISA? They made that selection (in theory). If there's a significant amount of money in there already it's not at all surprising that the money coming in has not been sufficient to keep the value up during the drop in the market.

The investors, your parents, are expected to be the people monitoring their investments. The Halifax has no responsibility or obligation to do so unless they also purchased an investment advice service from them.

Ultimately, all that they are seeing is the normal ups and downs of investing. There's no great reason to be concerned about those ups and downs.

There is reason to consider whether the investments they chose are most suitable for them and whether they should switch to a cheaper provider than Halifax.

Selling during a market downturn is what marks consumers as poor investors. Your parents should resist the temptation unless they like the idea of locking in the temporary drop in value instead of waiting for a recovery.

dunstonh

The Halifax has no responsibility or obligation to do so unless they also purchased an investment advice service from them.

Halifax dont offer that. Theirs is a transactional service. Flog the product and move onto the next person. No service arrangement is put in place.