Statement and understanding its workings

oceanobsession

Hello again. ive been looking at my statements and im confused again
my 2007 statement has investment gains since 21 oct 2006 but my
2008 statement has investment losses since 1 oct 2007

my gains were £40.66 all funds £2,188.91 for 2006
my losses were £721.68 all funds £3,853.03 for 2007 standard life charge
me 0.63% a year

How does it work. each fund has a fund manager who buys and sells
units if the units bought last month has gone down they dont sell them at
a loss so they keep them but if there up they sell them is that right. can
someone explain how it works for me to understand. or do they buy and sell at the end of the pension. i understand that the more ive got in shares the more money there is for standard life but how come i lost so much.
if they dont sell them till the end. please help me to understand it all
thanks folks oceanobsession

Debt_Free_Chick

oceanobsession wrote: »

Hello again. ive been looking at my statements and im confused again
my 2007 statement has investment gains since 21 oct 2006 but my
2008 statement has investment losses since 1 oct 2007

my gains were £40.66 all funds £2,188.91 for 2006
my losses were £721.68 all funds £3,853.03 for 2007 standard life charge
me 0.63% a year

How does it work. each fund has a fund manager who buys and sells
units if the units bought last month has gone down they dont sell them at
a loss so they keep them but if there up they sell them is that right.

I think you're in a bit of a muddle.

the fund manager does not buy and sell units - you do that. When you pay a contribution, the amount you pay buys a number of units. The number of units depends on the price on the day you buy them (i.e. the day your contribution is received).

You sell units if you want to switch out of a fund; transfer the whole pension; or at retirement to convert your fund to a cash sum (with 75% of that cash used to buy an annuity).

The fund manager takes all the money in the pot from all the investors in that fund and buys investments. If the fund is a UK equity fund, the manager is buying shares in UK companies.

Generally, they don't routinely buy and sell shares every day. They will only sell if they have a reason for doing so - often, because they believe the price is likely to fall; or the forecast for dividends is not good. There can be a number of reasons, depending on the investment strategy adopted by the fund.

can someone explain how it works for me to understand. or do they buy and sell at the end of the pension. i understand that the more ive got in shares the more money there is for standard life but how come i lost so much.

Ignore any contributions you've paid in the past twelve months.

Assume you had 100 units in a fund exactly one year ago. The price of those units was £1 so your fund was worth £100.

Now, the price of the units is only £0.75p - so the value of your fund is £75. Over the year you've "lost" £25.

How can this be? Well the price of the units depends on the value of the investments that the fund manager holds. In our UK Equity fund, the value of the investments is the price of the shares in the fund. The price of the shares depends on the value placed on them by the Stock Market.

If "the Stock Market falls" it means that the market is valuing the shares lower now, than in the past.

All of this filters through into the unit price.

The unit price directly reflects the value of the investments held in the fund.

This is a huge simplification of what is a complex issue, but hope it's a start.

dunstonh

The other thing to realise is that different funds have different objectives. Take a UK Growth fund. It has to invest in the UK stockmarket. It doesnt matter if the fund manager knows the UK is going to be awful for the next 12 months or so. That is the remit of the fund. You or your IFA picks the funds to build your portfolio. So, if you pick a medium/high risk spread then you will get medium/high risk volatility (ups and downs).

oceanobsession

Debt_Free_Chick wrote: »

I think you're in a bit of a muddle.

the fund manager does not buy and sell units - you do that. When you pay a contribution, the amount you pay buys a number of units. The number of units depends on the price on the day you buy them (i.e. the day your contribution is received).

You sell units if you want to switch out of a fund; transfer the whole pension; or at retirement to convert your fund to a cash sum (with 75% of that cash used to buy an annuity).

The fund manager takes all the money in the pot from all the investors in that fund and buys investments. If the fund is a UK equity fund, the manager is buying shares in UK companies.

Generally, they don't routinely buy and sell shares every day. They will only sell if they have a reason for doing so - often, because they believe the price is likely to fall; or the forecast for dividends is not good. There can be a number of reasons, depending on the investment strategy adopted by the fund.



Ignore any contributions you've paid in the past twelve months.

Assume you had 100 units in a fund exactly one year ago. The price of those units was £1 so your fund was worth £100.

Now, the price of the units is only £0.75p - so the value of your fund is £75. Over the year you've "lost" £25.

How can this be? Well the price of the units depends on the value of the investments that the fund manager holds. In our UK Equity fund, the value of the investments is the price of the shares in the fund. The price of the shares depends on the value placed on them by the Stock Market.

If "the Stock Market falls" it means that the market is valuing the shares lower now, than in the past.

All of this filters through into the unit price.

The unit price directly reflects the value of the investments held in the fund.

This is a huge simplification of what is a complex issue, but hope it's a start.

thanks for youre help oceanobsession