My ISA problem

MajorR

I have had a maxi ISA with Scottish widows since 2001.

Total investment £8,000
value £7,000

After 4yrs my money is worth a grand less!! great business.

SW say that my investment fell after the shares i had dropped after the 9/11 attack and im still waiting for them to recover.

So what do you guys suggest,
should i keep putting money into this ISA as its tax free or just keep waiting till i at least get my money back then close the account which is what ive been doing till now, but 5 years is a long time!!
please help

cheerfulcat

Hi, there,

You don't have to keep the same fund in your ISA if you're unhappy with it. I would be inclined ( this is not advice, it's just what I have done! ) to move out of an underperforming fund, rather than wait for it to improve as it could be a long wait

I would also keep putting money into the ISA, if you are happy to keep investing in the stock market. It can go into a new fund; you could keep the SW one and go for one that complements it.

ReportInvestor

Major Don, can you tell us the name of the Scottish Widows Fund you are invested in? It might help us evaluate past performance and future prospects - or at least let you know if it is a "dog fund".

I imagine that you made your investments in 2001, either side of the end of the tax year.

carnet

Scottish Widows (or, more precisely their SWIP investment arm) actually have one or two pretty good funds, run by very able and long standing managers.

However, these are, in the main, what most people would regard as "specialist" vehicles and, as such, perhaps perceive as being too "risky".

dunstonh

Ok, lets look at this logically.

1 - you invested in the stockmarket before a stockmarket crash.
2 - It looks like you bought your product from LTSB (assumption i know). Never buy from a bank. Bank advisors are tied and tied advisors are not allowed to give investment portfolio advice and are not allowed to recommend investment funds. They can only present the funds available to you in your risk rating for you to choose.
3 - Guessing a bit here but it is probably in just one investment fund. No diversification and if UK, then you have stuck your investment in an underperforming index.

You need to be aware that investing in the stockmarket involves ups and downs. You also chose a bank to do this and bank funds tend to perform below par. Even if they have an established insurance company name attached to them, it doesnt mean you are getting the full insurance company product. A number of the scottish widows products available through LTSB or direct from Scot Widows are cut down versions of the IFA version and usually cost more too.

Waiting in that fund or cashing it in are not the only options, as has been suggested above by the others. Switching it to a fund supermarket and selecting a range of funds across the sectors to match your attitude to risk would be far more suitable. You wouldnt be down on your money if you had taken that approach from the start.

EdInvestor

Hi Major Don

You might like to have a look at what else is available at Widows.

Click on this link and you will see the Widows funds listed from no 1555 thru to 1604 (the last few are on the next page).

Each fund shows the 1,3 and 5 year's performance over on the right hand of the page.You may like to look through and note which ones seem to have done well.

Can you spot the one your money is in? How does it compare?

They will always tell you that "past performance is no guide to the future" but it's always worth a look IMHO. A consistently good performance often indicates a good fund manger who knows what he's doing.

MajorR

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EdInvestor
The fund im in is called 'Environmental Investor Fund' SEE HERE

dunstonh
Correct on all 3 points. Would you say that if i had taken a different route similar to the one you mentioned i would be up on my money now?, even with the stock market crashing atfer 9/11.


Im not a big on money matters as you can see. Is 8k was my life savings and i just thought to do something with them rather than leave them in the bank, was i bad move.

carnet

Major_R.Don wrote:

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EdInvestor
The fund im in is called 'Environmental Investor Fund'

Fairly lousy fund which, as you can see from Trustnet, has had a number of different managers since 2001.

It has returned just £812 on a £1000 investment over 5 years [Source: Money Management/Standard & Poors, January 2006].

To put that into context, the average UK Equity Growth Fund has delivered £1066, and the average UK Equity Income fund £1303 over the same period.

dunstonh

dunstonh
Correct on all 3 points. Would you say that if i had taken a different route similar to the one you mentioned i would be up on my money now?, even with the stock market crashing atfer 9/11.

Yes. Of course, you could have picked a worse one. It is fair to say that had you gone with an IFA who had picked from the range of top selling IFA funds of 2001, then you would be in surplus at this point. I mention the top selling funds of that year to avoid the easy option of listing alternatives which have been better. If they were the top funds sold, then there would have been a good chance that you would been in at least some of them.

From a personal point of view, not one of my clients is in a negative position at this time and I would expect many IFAs to say the same with their unit linked book. Scot widows do have a couple of good funds, so you cannot eliminate them outright (mostly in pension and life funds).

There has been a trend for a number of years now to invest on an asset allocation profile involving investing certain percentages of your money across the various investment areas. The old view of never put all your eggs in one basket. For example, I put £7k into an ISA yesterday and selected 12 funds. Some of the funds had as little as £180 in. The old way of investing 100% into one fund contains more risk. When you invest, you are looking at the future. No-one can tell you what the best fund in the future is going to be. With thousands of funds out there, the chance of picking the top one is tiny.

Research has shown that when you invest in a range of sectors and take the average performance only of that sector, you would have outperformed the top performing fund of each sector over a 10 year period, had you gone into it 100%. That is because each sector has its good times and its bad times. When are those good times and bad times going to be? - no-one really knows. So spreading it round reduces the risk and increases the potential.

Just look at the UK, if you invest in a UK equity fund (managed or tracker), you would expect to be in the top sector one year in every 5 to 7 years. If all your money is there, then in 20 years, you may be lucky to have 3-4 top performance years.

Im not a big on money matters as you can see. Is 8k was my life savings and i just thought to do something with them rather than leave them in the bank, was i bad move.

Your idea was right. Your implementation was the problem. Its still not too late to turn it round. Your options are to do it yourself and research by yourself and select a range of alternative funds or get an IFA to do it. I would expect an investment specialist IFA to transfer it to a fund supermarket and pick 7-15 funds across the sectors with percentages to match your risk profile.

Speaking of risk profile, what do you think your view on risk is? Are you cautious, adventurous, balanced on these matters? If you don't know, I can email you a questionnaire of 9 questions with multi-choice answers to help guide you to what your risk profile is. I have given it to other forum members who have found it useful and I use it every time when I deal with clients. The good thing is, it focuses on the negative times of investing and how you would feel and react. If you want a copy, send me a Private message with your email address.

It is possible/probable that if 8k is all you had, then it wasnt even the appropriate action in the first place.

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If £8K had been your life savings, any decent IFA would have told you not to trouble him with questions about the stock market.

Do you have a property to maintain, improve, repair?
Were you hoping to save up for a deposit on a property?

Whether the majority of IFAs would have been able to keep their paws off your money is an interesting question, but not one we can answer here.

MajorR

ok
Thanks guys, i feel like im getting somewhere now. I need to cancel this fund i have as its under performing. Just to keep things simple for now, if i was to stay with SW i would have them move my money into maybe 10 other funds that they have, yes?

For example i can see here all their funds listed in order for performance over the last 5yrs scottish widows . Now i can pick and choose which ten i want. Just for the record my fund is 9th from bottom for performance over the last 5yrs :wall: so dunstonh

Yes. Of course, you could have picked a worse one

there was only 8 worse ones i could have had :mad: :mad:

dunstonh
If i research myself i still need to find an IFA to implement things wouldn't i?

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Were you hoping to save up for a deposit on a property?

This is exactlly what the 8k was for and told the TSB's FA that at the time. I can still remember her words 'if your not going to buy for another year you can invest and have alittle extra in a years time' here i am 5 years later and a grand worse off, and the property boom has kicked in and my money was trapped :mad: :mad: . How does the saying go about a fool and his money!

What makes me so mad is when i had the 8k in the bank they was phoning me every 2 weeks to come in and see them. But no one has called in 5 years to talk about moving the money into a better fund.