Is it time to bail out?

alm71

Since 2000 my husband and I have lost £7000 through having isas linked with stocks and shares. We invested as a result of a critical illness policy which paid out when I nearly lost my life to a critical illness 8 years ago. These investments were recommended by an independant financial advisor. Presently our investments are worth in total £13,000 (2 x skandia isas and 1 x skandia multifund). We are both really worried at the moment about the losses to our savings. We are not wealthy people, my husband is a lorry driver and I'm a student nurse. We are tempted to cut our losses and cash in the policies but our financial advisor recommends that we just leave them in. We just don't know what to do. I would be really grateful for anybody's advice.

dunstonh

We are both really worried at the moment about the losses to our savings.

They are not savings. They are investments. Savings are what you keep safe for your emergency fund and money you need in the short term and cannot afford to lose. Investments are what you do for the long term and expect them to fluctuate.

We are tempted to cut our losses and cash in the policies but our financial advisor recommends that we just leave them in. We just don't know what to do. I would be really grateful for anybody's advice.

You have seen a 28% drop on the market. Currently you suffer a paper loss. Pull out now and you crystallise that loss. There is some quite good data out there now which suggests now is a good time to be investing, not pulling out. Significant numbers of companies trading at discount, dividend yields higher than gilt yields for the first time since 2003 etc. They are the typical signals you look for to invest, not pull out. It doesnt mean we are at the bottom as you still have this fear factor and the markets dont like unknown fear. However, things do look a lot brighter than anytime in the last 12 months.

vbrindle

I take it that this is a managed fund of some kind.

It all depends how soon you want to get hold of the cash. This kind of investment always carries risk but the rewards are usually greater than cash savings.

People get concerned when the value of the fund goes down but I expect that it will go back up and beyond, but it will take time because we're in a dip at the moment. Pensions are in funds and I remember them saying that 5 years prior to retirement it should be just put in as cash instead of a fund and I can see why now.

Are you already in profit? Was the 13k from the 7k?

alm71

Sorry, I should have been a bit clearer. We had an original investment of £20,000 which is now valued at £13,000.

dunstonh

How is it invested? I dont have anyone from 2000 in a negative position and I can only imagine that you would be if you would be that much worse off with a higher risk spread (I fear fashion investing).

alm71

To be honest my independant financial advisor has been in charge of the investment spread. We originally invested in 2 isas and 1 investment bond. They took a knock after 9/11 but we left them in to hopefully recover in the future. We were advised to take a regular income from the investment bond and to put into a personal pension. We were told that even if we took a regular income it would not affect to original value of the investment. Then 2 years ago our financial advisor advised us to withdraw from the investment bond and to put the money into the existing 2 isas and open a new skandia multifund. To be honest my husband and I are pretty clueless where investments are concerned and what I have written above sounds really confusing. I hope that I've made sense.

dunstonh

They took a knock after 9/11 but we left them in to hopefully recover in the future.

9/11 only took about 8 months to recover. The tech and media stocks took a hammering and have never recovered. However a portfolio heavy in those would be high risk. A general FTSE tracker would be worse off as well. Are you taking an income from the ISAs?

ISAs are better than bond so that makes sense. I just wonder if your investments are in line with your risk profile.

tirednewdad

In my opinion, the markets are quite low at the moment. They might fall again but they are unlikely to be as dramatic.
If you are investing (saving?) for the long term then i would leave my money in the stocks and shares as there is a high chance that the market will pick up again to high levels similar to the times when you invested.
To simplify it- you are selling when the share value are low at the moment. If you wait a few years the markets will probably increase so that you can sell for a higher price.

You should only ever put money into the stock market that you can afford to. everything else should go into cash ISA's

Hope this helps.

droopsnoot

I'm in a similar position with, I think, a Nationwide managed stocks ISA. Money put in around 2000 (I think), dropped in value by a massive amount over the next couple of years, by the beginning of this year it had just about crawled back to the original amount I put in seven years before. I didn't motivate myself to move it, and I dread to think what it's worth right now.

I had considered grabbing it out and investing in some overseas property, just because it would be very hard for it to perform as badly as it has over the last eight years.

dunstonh

I had considered grabbing it out and investing in some overseas property, just because it would be very hard for it to perform as badly as it has over the last eight years.

Overseas property has been dropping worse than here in typical UK property investor hotspots.

Nationwide tend to retail trackers and that is probably why you have seen poor performance. All the money in one area that hasnt been a very good area to be in.

alm71

I'm really scared now. I wish I'd bailed out 3 weeks ago when I was tempted to do it!! Hindsight is a fantastic thing. How much worse is this going to get?