S&S ISA question - is this 'normal'?

stardust09

Hi,

Having only recently dipped my toes into the S&S ISA world, I am looking for some reassurance about what is 'normal'.

I have been investing in the Vanguard Life Strategy 60 and Vanguard Small Cap funds for about a year now, starting with one lump sum then odd bits of dripfeeding into them so my whole portfolio is only £2000 to date as that's all I can spare at the moment.

During that time, I have mostly been in the red by £1 to £20 in each fund but yet I've heard other people on this forum talking about growth in their VLS funds.

I know this is long-term investing and that I should probably put more into my funds when the cost is low! However, I had just hoped that over a year, I would have seen some growth in my funds, however little.

I am probably sounding a total novice (which I am!) and do get lured in by scary articles which say you can lose more than you gain if you invest in the stock market. To put my situation into perspective, I am looking at least a 20-25 year time scale on my funds as I see them as the start of my retirement fund (I am 35 years old, self-employed and house-share). I don't really want to start a SIPP because of the fees and because I want to keep my options open in case I want to access the money to buy myself a property in the future.

So, I suppose I'm asking, can I have confidence that my Vanguard funds to date are performing as might be expected and that over the longer-term I could hope for more growth than my 1.8% Post Office ISA?

Thanks in advance for any advice which can get me through this wobbly moment! And thanks for being patient with my lack of confidence!

Linton

There has been a significant drop in prices in the last couple of weeks down about to what they were nearly a year ago, though it looks like they might be recovering a bit now. So much of your drip feeding would have happened when prices were higher. This sort of behaviour is perfectly normal.

Have another look in 5 years time - you might be pleasantly surprised.

ChesterDog

It can be a bit worrying, can't it?

But this is exactly why investing is a longterm game.

Your choice of fund is sensible, your doubt is entirely understandable. All you have seen so far is your money slowly disappearing.

Give it time to do its job. Ultimately, you will be glad that you did.

You did exactly the right thing in seeking advice and reassurance instead of pulling money out and pointlessly crystalising a small loss for nothing. So well done, keep calm and carry on.

Edit: The answer to your final question is yes. :-)

westy22

According to Vanguard the performance of their funds is shown on this link https://www.vanguard.co.uk/uk/mvc/investments/mutualfunds#mf_perftab

Looks like they are saying 5.72% on the VLS60 from Feb 13 to Jan 14 but that would be based on the amount that was already there in Feb 13 whereas you have been adding over the months since, so you would expect that percentage only on what was there in Feb 13

westy22

The Vanguard performance figures will have been calculated after the deduction of fund charges so either:

The drip-feeds you have made have been at high price points and the loss on these purchases has completely eroded the profit you made on the early purchases or

Platform / IFA charges have taken a heavy toll on the gains you should have made

dunstonh

I am probably sounding a total novice (which I am!) and do get lured in by scary articles which say you can lose more than you gain if you invest in the stock market. To put my situation into perspective, I am looking at least a 20-25 year time scale on my funds as I see them as the start of my retirement fund (I am 35 years old, self-employed and house-share). I don't really want to start a SIPP because of the fees and because I want to keep my options open in case I want to access the money to buy myself a property in the future.

The fees are little or no different on the SIPP to the ISA. A personal pension is likely to be the most cost effective option.

So, I suppose I'm asking, can I have confidence that my Vanguard funds to date are performing as might be expected and that over the longer-term I could hope for more growth than my 1.8% Post Office ISA?

They will perform with the markets. Whatever that will be. Up and down is normal. You paid most of yours in when the markets were higher. So, a loss is not unexpected. Plus, you have the dilution levy and you are only looking at a very short term.

Thanks in advance for any advice which can get me through this wobbly moment! And thanks for being patient with my lack of confidence!

The UK stockmarket is recently down around 5%. That is nothing in the scheme of things. If that is worrying you now, how are you going to be when the next 25% drop occurs or the next 40% drop (there have been two 40% drops in this generation).

Drops are not a bad thing unless you want the money out. Indeed, when paying in monthly, drops are a good thing as you buy the investments cheaper. Over the long term, you average out the ups and downs and the longer you leave it, the closer you will get to the long term average growth that investments can provide. However, in short term periods, like 12 months, you can get extreme events that see big losses or big gains outside of the the long term average.

takesyourchances

Hi Stardust,
I am just over a year into my S&S ISA like yourself and have the VLS 60% and also 6 side funds, my VLS hit towards 6% at one point max and then close to zero and is now at around 2.5%.

The biggest swing in my side funds has been with my Aberdeen Global Asian Smaller Companies fund, it peaked during last year at a rapid pace hitting about 13% in a matter of months and down and back up towards that again.

At the moment the Aberdeen Asian Smaller Companies fund has swung to -13% but it is only just over 5% of my portfolio in my S&S ISA and I knew it would be a volatile fund but I still believe in the long term potential with it and why I opened it.

Linton maybe will remember when I was posting on the VLS topic about adding it around a year ago as a niche holding, I think I recall Linton opened it as well around that time if my memory serves me.

Despite the swings in this short term I am thinking of all my holdings like this as long term and 10 years away etc and longer, I see myself as invested from now on and I am a similar age to yourself 34.

I drip feed my funds and VLS today and my Aberdeen Asian Smaller Companies fund was one of them along with my First State Asian Pacific Leaders which dropped to -8% and I see these as buying more units at the moment for ahead. Overall my portfolio is up, but did dip into the red to about 0.25% this week. My best percentage is the Standard Life Global Small Companies which is at about +12% at the moment and was at +!5% at best in the last 12 months.

I plan to keep on adding and drip feeding and trucking on so to speak.

I am at a similar time scale invested to you and age so hope that helps from how I am seeing things at the moment.

Thanks.

stardust09

Thanks everyone, that is really helpful and very reassuring! I always planned to keep hanging in there but was just having a wobbly about how much more to carry on investing in my funds. I will keep having faith and I'm sure once a longer-term picture emerges (complete with peaks and troughs), I will be a more confident investor.

ChesterDog

There will be much bigger wobblies to come, but great waves to surf too. We hope. :-)

masonic

ChesterDog wrote: »

There will be much bigger wobblies to come, but great waves to surf too. We hope. :-)

I started investing in the mid-2000s and I wouldn't have understood that comment in 2008 when I saw my portfolio sink into the red by over 20%, but one of the things I'm most grateful for is that I didn't lose my nerve, but in fact filled my boots at those cheap prices and later reaped the benefits. It was a great learning opportunity. I still find it hard to see investments plummeting in the short term, but it is so important to rise above emotion and take that long term view when investing. You don't sell all of your bog roll when you see it discounted by 50% - if you think that's good value, you buy more!

Thrugelmir

To give you a feel of fluctuations in terms of individual shares. My best 6 month performer is Laird at + 47.5% and the worst is Centrica at -13.4% . So when you holding funds you may have one, two, three hundred shares all pulling in different directions every day. Don't lose sight of the fact that you are buying into living breathing companies whose fortunes can change over night. While markets move in general directions for a reason, the companies themselves also move according to their actual financial performance.