What would you do?

mikeesoo

I've just registered with this site after finding the information here very informative and enlightening. Now I'm posting my first post.

After some thoughts on what others would do in my situation. I have a £135000'ish mortgage with the Halifax on 2 yr fixed rate of 5.45%. Term ends June 2009. My wife & I had approx £170,000 between us to invest last June. Some of that was funds from a Maxi ISA I had been paying into which amounted to around £26000. Our IFA suggested we invest in a Portfolio Mgmt Service with Standard Life as we had wanted the chance of good growth to help build up retirement savings (I will be planning to retire and draw on company pension in about 6 years). They said that the Mortgage Int rate was a good one and advised against paying off. We accepted Medium Risk. Shortly after the portfolio was setup the credit crunch hit and our capital has been slashed by about £30000 in just over a year!!!

My question is what would you do if you were me? I'm thinking of paying off all or part of the mortgage when the fixed rate term ends and seeing how the investments are doing then; or take out about £60000 from the portfolio now and put it somewhere safe and then reduce the mortgage next year. Any thoughts??

dunstonh

hey said that the Mortgage Int rate was a good one and advised against paying off.

Sounds logical. Especially as its a fixed rate which would no doubt have a penalty on it if you did pay it off.

We accepted Medium Risk.

So that puts it in the area where losses of upto around 30% are possible.

hortly after the portfolio was setup the credit crunch hit and our capital has been slashed by about £30000 in just over a year!!!

A loss of just 17% so well within the tolerance of medium risk and less the the drop that the general stockmarket has seen.

my question is what would you do if you were me?

It doesnt matter what we think. The answers you get could range from those that are paranoid of risk to this that are high risk or speculative investors. You have said you are medium risk and you have suffered a loss that is more in line with low/medium at the moment.

Investments are for terms in excess of 5 years for good reason. In an average 10 year period you would get something like 2 bad years, 2 years that do nothing and 6 good years. You dont know what order they will come in and you could get some variation on the good and the bad. You could get the 2 bad years first before you get 6 years of postive. Or you could get it the other way round.

You have had a bad year first and on paper you have suffered a paper loss below that of your risk profile. If you cash it in now you crystallise the loss and guarnatee that money is gone forever.

Perhaps though a re-assessment of your risk is required as you have said medium but have got concerned at a smaller loss than is typical for medium.