Portfolio Bond

aerochago

Hi,

We were sold a portfolio bond for £60,000 five years ago and we can now take the money out without having to pay any fees.
In light of the world's problems the money has been dropping and rarely going up and currently stands at £58,000.
We are at a loss to know the best way forward, any suggestions please.

Regards

Alan

dunstonh

n light of the world's problems the money has been dropping and rarely going up and currently stands at £58,000.

You need to tell us how it is invested. Whilst there has been a minor decline this year and another in 2011, the other years were growth years or a stable year. So, you must have some assets that have not followed the general trend. Or perhaps you have taken some income/withdrawals?

aerochago

dunstonh wrote: »

You need to tell us how it is invested. Whilst there has been a minor decline this year and another in 2011, the other years were growth years or a stable year. So, you must have some assets that have not followed the general trend. Or perhaps you have taken some income/withdrawals?

Ok, as follows

All L&G Life
Jupiter Merlin Income Portfolio Fund 3,398.3720
M&G Feeder of Property Portfolio Fund 8,174.5790
M&G Global High Yield Bond Fund 7,221.5080
M&G Strategic Corporate Bond Fund 10,942.9870
Mixed Investment 0-35% Fund 1,345.2170

Linton

aerochago wrote: »

Ok, as follows

All L&G Life
Jupiter Merlin Income Portfolio Fund 3,398.3720
M&G Feeder of Property Portfolio Fund 8,174.5790
M&G Global High Yield Bond Fund 7,221.5080
M&G Strategic Corporate Bond Fund 10,942.9870
Mixed Investment 0-35% Fund 1,345.2170

Ignoring the small Mixed Investment fund, Trustnet shows that over the past 5 years your investments have provided a total return of 25-35% - call it 5%/year. So I would echo the question on whether you have been withdrawing money.

aerochago

Linton wrote: »

Ignoring the small Mixed Investment fund, Trustnet shows that over the past 5 years your investments have provided a total return of 25-35% - call it 5%/year. So I would echo the question on whether you have been withdrawing money.

My wife has written the following,
Stocks and shares were not our first choice, we would rather have put it in a building society acct but were advised this was a better option as it would give a regular income.
October 2010.
Originally £85,000 with an income of £320 per month but after one year we took £25,000 out including the % fee for some building work.
The remaining £60,000 gave us an income of £249-78 per month which we drew until April 2015 when we stopped it. Since then world events have taken a toll on the amount in the portfolio so now down to £58,000. If the trend continues will we ever be making any significant amount of money in the near future or is it best to invest in something else.

Kathy Rushworth

enthusiasticsaver

Stocks and shares are down this year - unfortunate for me as this is my first year of investing but I can see the wisdom of leaving it in bonds. It depends really on your attitude to risk. If you withdraw now you solidify any losses you have made. If you paid £85k originally and withdrew £25k and had a monthly income of 4.5% and still have £58k of value in it that would seem to be quite a good return to me. If you reinvest the income that would have increased the value so I am not sure it has performed badly but there are others more experienced than me who may disagree.


What would you do with it if you withdrew it - stick it in high rate current accounts or a pitiful rate on a savings account? Personally I would feel inclined to leave it in but if you are going to worry about the normal ups and downs of the stockmarket you may be better taking it out.

coyrls

aerochago wrote: »

My wife has written the following,
Stocks and shares were not our first choice, we would rather have put it in a building society acct but were advised this was a better option as it would give a regular income.
October 2010.
Originally £85,000 with an income of £320 per month but after one year we took £25,000 out including the % fee for some building work.
The remaining £60,000 gave us an income of £249-78 per month which we drew until April 2015 when we stopped it. Since then world events have taken a toll on the amount in the portfolio so now down to £58,000. If the trend continues will we ever be making any significant amount of money in the near future or is it best to invest in something else.

Kathy Rushworth

To make the maths easy, if you are taking an income of £250 a month on £60,000 that is £3,000 a year, which is 5% of your capital. This is above the general 3-4% "safe withdrawal" level that you would expect to preserve your capital, so it is not really a surprise that your capital is down 3% over four years. In fact I would say you've done pretty well and certainly better than you would have done if you had put your money in a building society account.

jimjames

coyrls wrote: »

To make the maths easy, if you are taking an income of £250 a month on £60,000 that is £3,000 a year, which is 5% of your capital. This is above the general 3-4% "safe withdrawal" level that you would expect to preserve your capital, so it is not really a surprise that your capital is down 3% over four years. In fact I would say you've done pretty well and certainly better that you would have done if you had put your money in a building society account.

I'd say it's done massively better than if it was in a building society. I think the OP is being hugely ambitious expecting such good returns compared to a bank account when it's already done so much better. Leaving it to grow should increase the value long term, certainly I'd expect more than 1% in a bank would give.

Linton

aerochago wrote: »

The remaining £60,000 gave us an income of £249-78 per month which we drew until April 2015 when we stopped it. Since then world events have taken a toll on the amount in the portfolio so now down to £58,000. If the trend continues will we ever be making any significant amount of money in the near future or is it best to invest in something else.

Kathy Rushworth

You have been taking 5%/year which is what I roughly estimated the average return to have been. So its not surprising that the capital value hasnt moved much. You have at least got significantly more than you would have with a savings account.

You probably wont make a large amount of money as you have invested pretty cautiously mainly in bonds. These will give a steady return generally higher than a bank account. However with drawing 5% you would expect the capital to remain fairly constant with some short term ups and downs. The more you take in income the less is available to build up the capital. You must choose the right balance to meet your needs.

If you were wanting capital growth you could consider a higher % in equity (shares). This would also help if you wanted a reasonable chance of your income matching inflation. On the other hand more equity means larger value fluctuations. Again its all a matter of achieving an acceptable balance.

The final point to make is that investing is for the long term. To remain sane you must get used to short term value variations. If you cant, you will be forced back to bank interest which will provide less return over the long term and will certainly not lead to an inflation matching income.

dunstonh

Stocks and shares were not our first choice, we would rather have put it in a building society acct but were advised this was a better option as it would give a regular income.

By the sounds of it, the portfolio bond has done rather better than the savings account.

Since then world events have taken a toll on the amount in the portfolio so now down to £58,000.

Forget that. You get good years, bad years and nothing years. You have to average them out. Not look at one period in isolation.

If the trend continues will we ever be making any significant amount of money in the near future or is it best to invest in something else.

You are making a good amount. However, you have been drawing it.

Taking 5% withdrawals in a period of low inflation is increasing the risk of erosion. Reducing the withdrawals earlier than you did would have been better. However, it has made more for you than a bank account. Just think what the bank balance had been had you drawn the same amounts.

aerochago

dunstonh wrote: »

By the sounds of it, the portfolio bond has done rather better than the savings account.



Forget that. You get good years, bad years and nothing years. You have to average them out. Not look at one period in isolation.



You are making a good amount. However, you have been drawing it.

Taking 5% withdrawals in a period of low inflation is increasing the risk of erosion. Reducing the withdrawals earlier than you did would have been better. However, it has made more for you than a bank account. Just think what the bank balance had been had you drawn the same amounts.

Yes thats what we should have done, we just accepting everything was ok and never checked it! We have stopped now so would you suggest we dont draw anything until, when?