Maturing 10 year investment worth less than paid in

devilment

About 10 years ago I signed up for product provided by Lincoln Financial Group called a Maximum Savings Plan. This involved me investing £100 a month into buying unit trusts. It is due to mature at the end of April 2009 and I have been provided with the valuation as of March 2009. For an investment to date of £11,900 my fund value is £9,800. My options are to continue paying into the policy, invest the money into a Lincoln unit trust or ISA or take the money and run. Since starting the policy my financial situation has changed in that I now have a mortgage. I was hoping when the policy matured to have made some profit and to use it as lump sum payment against my mortgage as well as using the £100 I was paying each month to overpay my mortgage. Ignoring inflation and interest lost if I'd just paid into a savings account, I would need the value of my held units to rise by 22.5% just to get back my investment. Common wisdom has it that when the market is down, it is the time to buy units as they're cheap but how long would it be before I'd recover my losses? Should I cut my losses and treat it as a £2000+ lesson?

Rafter

Unlucky to have lost over a 10 year period - but that is mainly due to the stock market being in the doldrums. Even so, with income reinvested you either had a bad investment manager or the commission and fees on the product wiped out a lot of your gains.

Personally, I would be tempted to cash it in and invest in a tracker fund, preferably using your ISA allowance. Think you should then see gains hopefully well above inflation and savings account returns. Keeping the money where it is given poor historic investment performace doesn't seem to be a great idea, but who knows! It could be the star performing fund of the next 5 years!

R.

Myrmidon_J

I believe it is the case, statistically as well as emotionally, that the last ten years represents the worst rolling ten-year period on record, in terms of investment returns. This is unfortunate.

I would always advise that existing investments are considered in terms of their future prospects - ignoring what you've paid in, etc., as this will tend to encourage "flogging a dead horse" (the mental logic is equivalent to gamblers chasing losses).

There are undoubtedly better investment propositions out there, but I would ask: what is appropriate for you at this moment?

(Overpaying a mortgage typically becomes less effective as interest rates approach zero (the benefit is reduced), but this doesn't mean it should be ruled out.)