Advice please

abouttobail

We brought for my mother a bond with Canada Life to fund her stay in a Nursing Home 16 months ago, just at the wrong time, since then the bond has lost around 10 - 15% in value, is it time to cut our loses or batten down the hatches for the long haul?

dunstonh

is it time to cut our loses or batten down the hatches for the long haul?

The bond is just a tax wrapper. A container for investments. No doubt the bond was chosen for a reason (tax efficiency being main thing). The investments within the bond are what matter and they can vary from cash through fixed interest funds, property to low and high risk equities.

So, there is no reason to call it a day on the bond and suffer a surrender penalty because of the investments chosen as you can alter those if required.

However, a loss of 10-15% is not bad. Especially if withdrawals are being made. That would suggest a generally cautious investment spread (as FTSE is down around 28% in that time). Pulling out will crystallise that loss. However, if will prevent future losses. But, it will also mean no gains if and when a recovery decides to kick in. Basic fundamentals suggest that may not be too far from now but it is never known when the bottom is until long after it has happened.

In a rough 5 year period you expect at least one major downturn. So, it was always going to happen. You just didnt know when. In this case it took 16 months.

lynd_2

We are in a similar position with our Canada Life Bond which we took out 18 months ago and now because our son has had his bank renegade on a loan agreement to finance two properties that he his building we are wandering whether to finance his project instead - if he sells the properties we will get our investment back plus interest or if he has to rent them he will pay us interest monthly until such time that he can repay the original loan.(The rental value is substantially more than the interest on our loan)