HL stocks and shares ISA advice needed

MONEYTREE_2

Hello. Investment newbie here.

Two months ago my boyfriend set me up an HL Stocks and Shares ISA, into which I put half my life savings - £40,000. The plan was, he'd examine the various funds every month and tell me when and what to buy, sell, move, etc. Each time I logged in, the funds had increased a little in value.

One month ago I found out that he has been cheating on me (for months, and not for the first time), so I have dumped him and want no further contact.

I've logged into my account a few times since and, to my horror, the funds are dropping in value every day. I am invested in 8 different funds and all of them have dropped. Some have plummeted!

I have now lost £1,500 of my £40,000 and am worried my nestegg will be wiped out.

I rang HL in a panic and, whilst they won't give specific advice they did say that this was quite normal and I should see these funds as a long term investment of 5 years. If this is the case, why did my ex say these funds need to be examined monthly and money moved about accordingly?

The problem is, I now have nobody in my life who knows the first thing about investments.

Should I

1. stop logging into the HL account and hope that all 8 funds will come back up, given time

2. remove all the money and put it somewhere with a low interest rate but no chance of losing any money

3. Something else

I should add that I have already got 2 x 123 accounts maxed, so no chance of sticking the money there instead.

Thanks

Moneytree (< see the irony in my name?>

LHW99

Easy to say now, but don't rely on (any) friend's opinion - read up on what is suggested and make up your own mind, or isk a proper independent financial advisor, who will take to time to understand what you want and explain the pros and cons of different approaches.

However:
Funds will go up and down, as they are invested in shares that go up and down.
These type of investments are not the same as savings, which is why HL suggested a 5 year timeframe (many will say 10 is even better).
Shares (and hence many funds) were up just after the US elections, because the dollar dived, they are now dropping back again.

If you say what the 8 funds are, people here will no doubt express a range of opinions - but not advice as that isn't allowed. You read the opinions, and see how they fit with your own.

There are some questions:
£40,000 is more than one year's ISA allowance. Did you move money from cash ISA's or it did it go in over several years?
Do you have any cash savings apart from these funds?
Have you a mortgage, pension, dependents, debts? These may be relevant to what options are best to consider.

dunstonh

I have now lost £1,500 of my £40,000 and am worried my nestegg will be wiped out.

A 3.75% loss is not plummeting. That is a tiny loss. Wait until you get to a 20%-40% loss (£16k down). That is not a case of if but when. Even low risk funds can lose 10% quite easily.

I rang HL in a panic and, whilst they won't give specific advice they did say that this was quite normal and I should see these funds as a long term investment of 5 years. If this is the case, why did my ex say these funds need to be examined monthly and money moved about accordingly?

An economic cycle is around 10 years nowadays. So, that is the ideal minimum term as you get the whole of the cycle. 5 years is often quoted as there are not many 5 year periods that end up with a loss after that time.

Investment funds do not need examining and moving each month. That is overkill. This comes back to my earlier comment on whether he really knows what he is doing.

I wouldnt do this. You are not committed to a long term relationship (and have since broken up) and this money sounds important to you (life savings). How would you know if your boyfriend was doing the right thing for you? He could be a knowledgeable investor or he could be a Daily Mail reader and falls for fashion investing and high risk investing that they often promote. He is playing with your money. Not his.

Could you tell us the investment funds you hold with HL. it will give us an idea if there is a structure to the investing or whether it is random fashion investing. It will also let us tell you whether the investments are mainstream or niche and the risk levels.

chucknorris

MONEYTREE wrote: »

I should add that I have already got 2 x 123 accounts maxed, so no chance of sticking the money there instead.

It has all been said above, but honestly don't worry about it.

You know sometimes (despite already having £1m invested) I actually want my investments to fall so I can invest more at a lower level, I know that sounds crazy, but I'm probably staying invested for another 15 to 20 years, and I am very confident about having the opportunity to sell at a much higher level at some point within that timescale.

Equities will usually perform better than savings accounts over the long run. Don't forget your dividend income will be much higher than savings interest, and more favourably taxed too (oops sorry I forgot they were in ISA's).

EDIT: Sorry to hear that you haven't been treated well, that is the only real issue in your post, there isn't a financial one to worry about.

MONEYTREE_2

Thank you for the replies. I literally breathed a sigh of relief when Chuck said "honestly don't worry about it."

Replies to the questions:

"£40,000 is more than one year's ISA allowance. Did you move money from cash ISA's or it did it go in over several years?"

All of it was moved from cash ISAs except £15k of new money, this year's ISA allowance.

"Do you have any cash savings apart from these funds?"

Yeah 40k spread over 2 x 123 accounts earning 1.5% and 2.5k in a Nationwide Plus at 5%.

"Have you a mortgage, pension, dependents, debts?"

No debts, mortgage or dependents. I have a HL SIPP with just under 10k in it

Could you tell us the investment funds you hold with HL

Baillie Gifford Japanese Smaller Companies
Baring Europe Select
Fidelity China Consumer
Jupiter Global Emerging Markets
Legg Mason IF Japan Equity
Legal & General Sterling Income Fund
Man GLG Continental European Growth
Newton UK Opportunities

Thanks

Moneytree

dunstonh

Thank you for the replies. I literally breathed a sigh of relief when Chuck said "honestly don't worry about it."

The money is there and it has the value it says on the screen today. However, you still need to worry.

The spread of funds held includes some very high risk and highly volatile funds. They are capable of significant gains but also significant losses. none of the them are suitable for an inexperienced investor who worries about a loss of 3%.

HL have a cash account. You can move the money to cash if you feel you need to think about it and if necessary, you can move it back to cash ISAs if you are not ready to by investing at this time. If you do want to continue to invest, then you need to change those investments.

MONEYTREE_2

Thanks Donston

My head is now in a whirl and I am panicking! Just when I was geting used to the idea of not worrying you say "you still need to worry."

omg. Panic!

"The spread of funds held includes some very high risk and highly volatile funds. They are capable of significant gains but also significant losses. none of the them are suitable for an inexperienced investor who worries about a loss of 3%."

Which are the volatile ones?

If I pull out of them now, I will lose that £1,500 and never get it back though, won't I?

"You can move the money to cash if you feel you need to think about it and if necessary, you can move it back to cash ISAs if you are not ready to by investing at this time. If you do want to continue to invest, then you need to change those investments".

Oh crikey! what a mess! Panicking now.

What if I move it into cash and the funds start going back up? I will lose out again?

Agghh I think he must have really hated me to invest in these bad funds.

lisyloo

What if I move it into cash and the funds start going back up? I will lose out again?

Yes, if you sell from the funds then you crystallise a loss. Whilst it's there you have a paper loss.

Agghh I think he must have really hated me to invest in these bad funds.

I don't think that's the case.
His strategy over time may well work out, but what he didn't do is explain enough to you or made sure it fitted your appetite for risk.
Some people are quite happy to accept short term volatility for the promise of higher returns over the long term.


1) I think you need to think about your objectives for this money.
When do you need access?
Are you prepared to accept volatility day to day?
2) Once you have decided you can then determine whether what you have is correct for what you want.
3) If it's not then you can determine an exit strategy which might mean waiting until you don't have a loss.


My S&S ISA wasn't looking great for about a year from around July 2016 - July 2017, but all of a sudden it was looking better post the Brexit vote so at that time I took out some cash, however I had to wait over 1 year. My reward for waiting was that I sold when stocks were high. I didn't have an immediate need for the money, but I was forward planning as I have to pay off a mortgage in 2 years and didn't want to be short of cash.
If you aren't short then there isn't really a need to take it out with a loss unless you are really unhappy with the investment choices.

MONEYTREE_2

Thank you Lisyloo

To answer your questions

1) I think you need to think about your objectives for this money.
When do you need access?


I don't. I could tie that money up for another year or 5. I don't need it for anything immediately, as I have a secure income plus the 40k in current accounts if I fancy treating myself. But I do need to nurture that S&S ISA money, as it has to see me through retirement.

Are you prepared to accept volatility day to day?

So long as I can believe that it's just the normal ups and downs and it will all turn out good in the end. I might have to stop logging in and looking.

But Donston thinks I should get out now as they are volatile stocks.

I am hugely upset that my boyfriend set me up with all this when he knew the relationship was about to end (I didn't have a clue that he had already started a full blown relationship with someone else when he got me involved in these funds) and I'd be flying without a parachute. He really is a cad of the worst order and I blame him for the loss of the £1,500.

I should have put the money into NSandI at 1%

Moneytree

chucknorris

MONEYTREE wrote: »

Thanks Donston

My head is now in a whirl and I am panicking! Just when I was geting used to the idea of not worrying you say "you still need to worry."

omg. Panic!

"The spread of funds held includes some very high risk and highly volatile funds. They are capable of significant gains but also significant losses. none of the them are suitable for an inexperienced investor who worries about a loss of 3%."

Which are the volatile ones?

If I pull out of them now, I will lose that £1,500 and never get it back though, won't I?

"You can move the money to cash if you feel you need to think about it and if necessary, you can move it back to cash ISAs if you are not ready to by investing at this time. If you do want to continue to invest, then you need to change those investments".

Oh crikey! what a mess! Panicking now.

What if I move it into cash and the funds start going back up? I will lose out again?

Agghh I think he must have really hated me to invest in these bad funds.

Dunstonh is quite right, what I should have added was 'as long as your equity fund, matches your risk profile'. But it sounds like you want/need something with lower volatility.

They aren't bad funds, just probably not a good match for you.

bowlhead99

MONEYTREE wrote: »

But Donston thinks I should get out now as they are volatile stocks.

It is true, a number of them are quite volatile.

They are all "funds" though, which means they are collective investment schemes which spread your money over lots of companies. It is not like investing in 8 companies total and one of them is HMV and goes out of business and another is Blockbuster and goes out of business and another is M&S or Tesco and loses half its value overnight after announcing a really bad year for profits.

Some are more risky than others. I have a popular "emerging markets" fund that has gone up 40% since the end of last year. That can happen when its strategy is to invest in companies in far off developing countries like China, India, South Africa, Latin America, etc, which "have a good run" and then we announce brexit vote and everyone else's currency goes up in value relative to the pound, so the funds are worth more pounds. Actually a couple of months ago the fund was up over 50% this year, but it's down 10% in the last month.If you only invested a month ago you would have losses instead of gains.

It sounds quite scary to have a fund whose value can change value by 50% in a year *but* if that is only 5% of your overall portfolio and the rest of the ISA is invested in other stuff, it would not be a bad thing because when you keep it for the long term you ride out the ups and downs. You might even put *more* into it next year while it had fallen from 5% to 3% of your overall pot, so you could still say your money was evenly spread around different areas.

But this all presumes you are not going to go "aargh, this is scary" and bail out when the value is on the floor, and watch it go back up without you. Because that converts a "loss, on paper" to an actual loss. If you're the type of inexperienced investor that might do that, you shouldn't invest in volatile funds.

Or at least, you should invest in one big fund managed by a professional fund manager who maintains the allocation appropriately, and blends together some higher risk assets with lower risk assets, instead of lots of little specialist funds that you have to understand and watch.

Your boyfriend probably planned to do that monitoring and maintenance for you alongside his own investments so it was not meant to be a big problem for you. However, he invested in a mix of assets that followed his personal convictions and interests, and (assuming you had roughly an equal amount in each fund) was perhaps not very traditionally balanced.

For example there is a China fund and an emerging markets fund and two Europe funds but there isn't a North America fund. And most of the funds are equities (company shares) rather than bonds and property. So, while there is no saying that this couldn't overall produce a great return between now and retirement, it would not be a very smooth ride.

It is not that the funds are all completely terrible choices to use as part of a plan for someone that understands them. But it is not a set of funds that only has mild ups and downs and it does not look like a complete plan.

As it's clearly not a set of holdings that you're comfortable having, it *does* make sense to temporarily sell everything, do some research and reading for yourself, and then eventually buy back one or two funds which are globally diversified and invest in a broad spread of stuff without needing much watching. For the time being, HL will hold your cash inside the 'cash' part of your isa, just like a bank statement but with minimal or nil interest.

I am hugely upset that my boyfriend set me up with all this when he knew the relationship was about to end (I didn't have a clue that he had already started a full blown relationship with someone else when he got me involved in these funds) and I'd be flying without a parachute. He really is a cad of the worst order

As I'm a bloke, and it would be far too much of a cliche for me to play the white knight and commiserate about what a bad guy your BF was, I'll pay devil's advocate instead.

The guy was trying to help your finances by setting you up with no more than half of your liquid assets invested as a set of investments that would grow your wealth over time instead of doing what you were doing and leaving it earning a pittance in a bank account. Doesn't sound like "cad of the highest order". Perhaps didn't know it was necessarily over. Maybe had a deluded expectation that he would be able to make it work between you, and would be on hand to help you look after the portfolio here and there as needed over the long term. And maybe your ISA's high allocation of Europe funds was evened out by his own ISA's high allocation of USA funds or something, as part of a bigger plan for you to have a long term future.

And hey, he might have been banging some other girl on the side, but was he setting her up with a retirement plan??? To me, getting involved in your personal finances sounds like some sort of proper long term devotion or at least looking out for your best interests - rather than an outlandish "hmm, definitely dumping this girl next week, let me just mess up her finances first!"

and I blame him for the loss of the £1,500.

You still have as many shares in as many funds as you did two months ago. It's just that the market is not willing to pay as much for the assets as it once did. Nobody has taken your shares off you, or taken your cash and thrown it in the bin. It's a temporary change in value.

Of course, yes, assuming you sell now at these lower prices, that's a loss. But over the course of decades you will get lots of ups and downs and crashes and growth spurts. So it's not the end of the world.

You might think you are being given mixed messages here. But basically:

The funds are not completely outrageous, but they are not very well organised (not a complete balance) and they are likely to go up and down more than what you're comfortable with, and you don't need a portfolio that has lots of separate and specialist moving parts. So it is not a portfolio that works for you.

Yes, sell and take a small loss because what you have is not really suitable as something that works for you.

But keep at it with the investments rather than going back to cash for all your wealth. Do some reading on this.

I should have put the money into NSandI at 1%

You said this was to help you in your retirement. Cash at 1% in NSandI is going to dwindle away to a much much smaller number in real terms after a few decades. And even if it magically kept up with inflation, which it wouldn't, £40k will not see you through a 30-40 year retirement.

And you already have another £40k of cash that you can put into competitive bank accounts for emergencies and short or medium term savings needs.

So, this money needs to grow in real terms, and for that purpose, S&S ISA investments and pensions are much much better than ns&i cash deposits for the longer term.