Do ISA's deserve to be slated?

Judwin

lisyloo wrote: »

If you have any words of wisdom as to how we can improve things then I'd be very grateful for any advice/discussion.

I'm not qualified to offer words of wisdom, although I did pick 2 of the top 3 in the Eurovision song contest, winning myself 25p at Ladbrooks :-) I also picked last years winners at 33-1.:beer: Does that count?

It sounds to me you're adopting the 'once bitten, twice shy' approach to investing. You've been stung by a bank adviser selling you and your father in law a poorly performing GEB. I could easily have made the same mistake - indeed I was nearly (mis)sold an endowment years ago by the man from the Pru - but it doesn't take long reading threads here to realise taking advice from a bank, and buying GEB's, isn't a particulary good idea. If that's what you did - learn from it - and move on.

I've a degree in electrical engineering (failed the accoundance bit!), but I don't need that to know when my telly is on the blink.

lisyloo wrote: »

It's invested in Newton (income, higher income and european finds). We sought and paid professional advice for the fund choice and receive rebates.

You'll need to ask DunstonH about Newton and those funds.

lisyloo wrote: »

We are approx.
52% property
41% equities
7% cash

If the property is where you live, then AIUI the advice is exclude it from your calculations. If its commercial property, or second home/buy to let then fine.

If the 7% is cash ISA and 41% equity (ISA?), then that's the sort of thing I'd be happy with. However, from what you've said I suspect that the majority of that 41% is actualy pension - yes? And probably only 1% in the SS ISA?

If the 41% is equities not pension, and isn't in an ISA wrapper, then you'll be paying 32.5% tax on the dividend income every year, and possibly 40% CGT on the capital gain when you come to sell. Inside an ISA then none of that.

lisyloo wrote: »

How do you know that you aren't going to be made redundant (or have some other emergency) for 8 years plus?

I/you don't. But if that money has been there 8 years, then why add another years worth of cash to it so that next year you're asking the same question, but with a 9 in there? I'll accept the 3 months salary as cash savings argument, but most people aren't earning what you earn, so IMHO £30K in cash is excessive (for them - i.e. me). And once you've got you're 3 months saved, I believe it's time to look for higher returns.

That was my thinking. So I put £4000 in my 2006-2007 SS Isa on Jan 31's, and it's now valued at £4130 (so 3.25% up in 4.5 months) . Between April 13th and 17th I put another £7000 into a SS Maxi ISA which is now valued at £7110 (up 1.57% in 1 month) . I know it could all go pear shaped tomorrow and be worth half that, but so far I'm reasonably happy.

As the yanks say - Your mileage may vary.

Cheers,
Judwin

jamesd

Newton Income is average and is ranked 73/134 on three year performancecompared to the rest of the equity income and growth sector, delivering a yield of 1.09%.

Newton Higher Income is also average but is ranked 42/107 on 3 years performance. Yield at 3.50% is 17/107.

Newton European Higher Income Fund, if that's the European one it is, has too little history to say much about. Reasonably comparable with the other two so far.

I'm a little surprised that it's all in funds from Newton and they all seem to be average performers.

lisyloo

If that's what you did - learn from it - and move on.

I agree.
So would you agree that initially people are going to do badly before they can expect decent returns i.e. whilst they are learning.
What if they don't have a lot of time to put into it?
Does this mean they won't learn very quick and won't get anything like 12%-13%?
Om a 5 year cycle it's going to take a while isn't it? if they ahve a busy family life.

I'm a little surprised that it's all in funds from Newton and they all seem to be average performers.

So are you saying I shouldn't now trust professional advice?
So exactly what are unsophisticated investors meant to do?
I would not be unhappy with average (although clearly could do better).
But I'm being told on here that I should be expecting 12-13% and I reckon we've had 7% (over 7.5 years) so it just doesn't tie up.

I still remain of the opinion that it's not that easy for unsophisticated investors and quite easy to go wrong or get ripped off by advisors.

I don't think we've been ripped off but I can't see the higher returns that people are mentioning. Hence 6% in cash with little risk seems quite attractive compared with a little more or possibly less in S&S.

What would be a good thing to invest in to get these higher returns?

macca64

Judwin wrote: »

That was my thinking. So I put £4000 in my 2006-2007 SS Isa on Jan 31's, and it's now valued at £4130 (so 3.25% up in 4.5 months) . Between April 13th and 17th I put another £7000 into a SS Maxi ISA which is now valued at £7110 (up 1.57% in 1 month) . I know it could all go pear shaped tomorrow and be worth half that, but so far I'm reasonably happy.

As the yanks say - Your mileage may vary.

Cheers,
Judwin

Growth rates all depends on the risks taken, my ISA which was invested at the beginning of the year, is up around 5% in 5 months, which I'm happy with, but I have a smaller companies fund, which some might consider too risky, but I'm happy with that level of risk.

12% is reality, and can be acheived, but only if you take more risk. 7% p.a over 7.5 years is pretty decent if that's after changes!

Judwin

lisyloo wrote: »

I agree.
So would you agree that initially people are going to do badly before they can expect decent returns i.e. whilst they are learning.
What if they don't have a lot of time to put into it?
Does this mean they won't learn very quick and won't get anything like 12%-13%?
Om a 5 year cycle it's going to take a while isn't it? if they ahve a busy family life?

No - I don't necceserily agree. Yes a beginner is more likely to make mistakes, but it depends how much time you spend researching your options before chosing your investments. I personally wouldn't take the word of an IFA or Bank Adviser without doing at least some preliminary research on the things he/she suggests, and comparing their choices with other options in the same sector. The good thing about being here (on MSE) is that a lot of the options being pushed by 'advisers' (i.e. most GEB's and some Index trackers) are quickly debunked, so even the beginner can avoid these traps.

lisyloo wrote: »

So are you saying I shouldn't now trust professional advice?
So exactly what are unsophisticated investors meant to do?
I would not be unhappy with average (although clearly could do better).
But I'm being told on here that I should be expecting 12-13% and I reckon we've had 7% (over 7.5 years) so it just doesn't tie up.

Expecting is too strong a word. Aiming for, or hoping for would be better.

And whilst Cash ISA rates are currently up to 6%, they haven't been that high for the past 7.5 years. I doubt they averaged much more than 4% to 5% when inflation was down at 3%. So even your 7% investment return over the period beats Cash ISA by 2-3%.

However, the Newton Income and Newton Higher income carry a Trustnet risk ranking of 30ish and 50ish respectively, and both are performing below average for their sectors. The best performers in these sectors have done twice as well - although that doesn't mean they will continue to do so.

lisyloo wrote: »

I still remain of the opinion that it's not that easy for unsophisticated investors and quite easy to go wrong or get ripped off by advisors.

I don't think we've been ripped off but I can't see the higher returns that people are mentioning. Hence 6% in cash with little risk seems quite attractive compared with a little more or possibly less in S&S.

Yes the S&S is more risk, but the risk is a sliding scale, not a cliff edge. You can chose low risk investments, and you should still be able to better Cash ISA returns by a few percent.

lisyloo wrote: »

What would be a good thing to invest in to get these higher returns?

I think answering that question directly is against board rules. The highest returns can be 100%+, but they also carry the risk that you might lose 100% of your money.

My risky-est fund is a Russia and Greater Russian one, and it's down 3.7% in a month. My next most risky is a Latin American one, and it's up 6.5% in a month. My least risky is a UK other bonds fund, and it's up 1% since Feb 1st. I can't tell you till next April wheter I've met my target (which is 12% up). If it's less than the Cash ISA rate, then you can say "I told you so"

Cheers,
Judwin

lisyloo

If it's less than the Cash ISA rate, then you can say "I told you so"

That's not what I'm about. I'm here to learn.
But clearly you have to accept the risks you take especially if you have your eyes open.

Thanks for all the advice/help.

jem16

lisyloo wrote: »

So are you saying I shouldn't now trust professional advice?
So exactly what are unsophisticated investors meant to do?

The professional advice? Was it from an IFA or financial adviser at a bank?

The fact that they are all from Newton would suggest an adviser who is tied in some way. I remember reading a thread not that long ago where someone had been advised on Newton funds by a so-called IFA who turned out to be not independent.

Found the thread;
http://forums.moneysavingexpert.com/showthread.html?t=422242&highlight=newton

lisyloo

The professional advice? Was it from an IFA or financial adviser at a bank?

It was an IFA who was recommended to us by a friend.

We paid £100 plus VAT for their services and we get the commission rebated to our ISA each year (we've had a LOT more than £117.50 back).

As we were fee paying rather than commission based then I can't see why they would be biased.

Bear in mind that the advice was given in November 1999 so the advice needs to be looked at in that context.

I'm not that dissapointed with the advice.
It's average. OK not startling but it's not as if we have been in a terrible fund or ripped off here.

I just think that it's clear from this thread that quite a bit of research and effort is required to get the higher returns being discussed.
It's not quite as easy as sticking money in the bank.

I know a number of people who wouldn't be capable of doing this research and hence I don't think it's suitable for everyone.

StevieJ

lisyloo wrote: »

That's not what I'm about. I'm here to learn.
But clearly you have to accept the risks you take especially if you have your eyes open.

Thanks for all the advice/help.

Personally I think I would rather take your 6% net than be involved in property (in a bubble) or Judwins most safe other bonds (don't perform well against rising interest rates).

jamesd

lisyloo, considering that the advice is from 7.5 years ago I'd say that the IFA was lucky that it didn't turn out worse. I wouldn't say that you've been in terrible funds, just that the best ones change over time and if these were the best then they aren't the best now. I've no idea how good they were initially.

Given the amounts involved in the pension as well you should really be looking for annual reviews and also reviews if a fund manager changes, since that often produces worse performance in the future.

With 200,000 in the pension alone it's going to be easy enough for an IFA to earn their keep with increased returns. You could probably get that for 0.5% a year from an NMA IFA, perhaps also from others, and that should be enough to at least put you consistently in the top 25% of performers in most years, instead of the middle.

To do it yourself first decide how much down movement you'll take before giving up on the markets as hopeless. That'll decide how you need to mix the investments to achieve about that downside risk while getting as much upside as possible - by adjusting the percentages in each market sector.

For example Judwin mentioned a couple that could readily fall to less than half of their value - perhaps even 20% in a bad situation for a single country Russian one if the presidential change this year goes very, very badly. The Latin American one has more countries so a radical change in one will have less effect, but 50% is not unreasonable in an economic depression. Yet his bond fund will go up and down with interest rates and is pretty stable, so it helps to even out the average.

You're right that this isn't suitable for everyone. Even those who can do it may not want to spend the time. Fortunately the difference between middle and excellent performance is enough to make it worth paying someone once a few tens of thousands is involved.

I don't see anything in the rules here that prohibits people from recommending and suggesting specific funds, provided it's not a professional doing it for profit. I've been considering starting some sector-specific fund discussion topics, with some initial fund choice thoughts, just haven't gotten around to it yet.