Nutmeg - I feel like they've punished me

DAE

Hi all,

So springtime last year I decided to give Nutmeg Stocks and Shares ISA a try.

I put in my initial £500 and set up to save £500 per month (ambitious for me) by direct debit. I decided to put risk level at 8/10, because I'm of the mind that I'm starting small and may as well gamble - not like I was sticking my entire pension fund in there.

The pot increased to just over £3k i.e. what I'd put in and a small but passable return of a few %. The projections all seemed rosey. Solid, unspectacular returns.

The trouble came around October when I suddenly realised this wasn't sustainable. I was putting away £500 a month as soon as I was paid but struggling to pay credit card bills at end of the month without going overdrawn so it wasn't adding up.

I decided to use the Nutmeg money to clear my overdraft to get myself back on an even keel and reevaluate my strategy. So I removed £2500 from the pot, leaving all but the £500 (as I remember it I needed to leave this in to prevent the account from closing).

I thought this should be ok, as I'd had to withdraw £500 in the summer, and the account ticked on and built interest on the remainder.

So, imagine my shock when I checked how my £500 remainder was doing a few weeks later and saw that it had tanked to £378, a loss of 25%!

My initial reaction was a mix of bewilderment and anger. How has a fund that has been ticking along adding a few % suddenly caused a loss of 25%? I felt like Nutmeg had tried to punish me somehow for withdrawing most of the fund, and this was like a slap on the wrist.

I've thought about it and am wondering if there's a more plausible explanation. Does anyone have any ideas? Have I just been unlucky? Did the market crash coinciding with the same moment I withdrew my money?

What should I do now? Take my £378 and run, or continue to invest? Feels futile to start giving them my money again as it will take an age to get back that £122 loss.

Ta.

webjaved

I think it's just the market being the market, can't see anything fishy that may have gone on.

eskbanker

It's not a punishment for withdrawing!

There will of course be a plausible explanation, which should become clear when you look at the historical data showing the value of the units you bought - Nutmeg presumably publish charts, etc?

There certainly wasn't a 'crash' but there was a correction last autumn, which could have resulted in unit values losing 25% - if you think that's a big issue then frankly you shouldn't be investing in the first place!

DAE

eskbanker wrote: »

It's not a punishment for withdrawing!

There will of course be a plausible explanation, which should become clear when you look at the historical data showing the value of the units you bought - Nutmeg presumably publish charts, etc?

There certainly wasn't a 'crash' but there was a correction last autumn, which could have resulted in unit values losing 25% - if you think that's a big issue then frankly you shouldn't be investing in the first place!

Yeah, I think I've just got unlucky.

It seems in the days between my withdrawal request and the withdrawal going through, my investments took a hit to that tune.

So I never had £500 balance, it just went from ~£3000 straight to £378.

Paul_DNAP

Maybe the loss was accounted for just slightly before you withdrew?


e.g. a drop from £3000 to £2878 is only a -4% shift in the investment, and not a "25% drop" afterall?


And then £2878 minus £500 is the £378 you have now.

eskbanker

DAE wrote: »

Yeah, I think I've just got unlucky.

It seems in the days between my withdrawal request and the withdrawal going through, my investments took a hit to that tune.

So I never had £500 balance, it just went from ~£3000 straight to £378.

Yes, it's a lot easier to drop £122 from a £3000 holding than it is from a £500 one, although it was probably a bit of both - do you have the ability to track movements on your portfolio to see exactly what's happened?

It may have been a useful wake-up call anyway, because if a far-from-extraordinary drop in value (not actually a 'loss' until/unless you sell) caused you to feel bewildered and angry, then I'd humbly suggest that you really aren't an 8 out of 10 on a risk scale, and should consider revisiting that and adjusting your portfolio accordingly....

AnotherJoe

DAE wrote: »

I've thought about it and am wondering if there's a more plausible explanation. Does anyone have any ideas? Have I just been unlucky? Did the market crash coinciding with the same moment I withdrew my money?
Yes.


What should I do now? Take my £378 and run, or continue to invest? Feels futile to start giving them my money again as it will take an age to get back that £122 loss.

Ta.

LOL. One of my investments has lost $70k since November.
The markets dropped. Thats all. No conspiracy.
They go up and down.
Its wholly unrealistic to expect no downs.

You are panicking.
Perhaps put your money in the building society if you can't tolerate a loss of £122.

webjaved

AnotherJoe wrote: »

LOL. One of my investments has lost $70k since November

Ouch! How did that make you feel? I'd have sleepless nights over that!

dunstonh

So springtime last year I decided to give Nutmeg Stocks and Shares ISA a try.

So, having done your research, you understood at this point that you should ideally be investing for at least an economic cyle (about 10 years) and that in that period there would be years with gains, years where nothing really happens and years where losses occur.

I decided to put risk level at 8/10, because I'm of the mind that I'm starting small and may as well gamble - not like I was sticking my entire pension fund in there.

So, that puts you way above the risk profile of the average UK consumer but you seem to know that you were going to see much more volatility

So, imagine my shock when I checked how my £500 remainder was doing a few weeks later and saw that it had tanked to £378, a loss of 25%!

A 25% loss for risk 8 is quite small. But surely you knew this before you started. Your early paragraphs suggested you did.

However, a lot of that loss would have been on the amount you drew. You are just equating to the net contribution amount after withdrawals.

My initial reaction was a mix of bewilderment and anger. How has a fund that has been ticking along adding a few % suddenly caused a loss of 25%? I felt like Nutmeg had tried to punish me somehow for withdrawing most of the fund, and this was like a slap on the wrist.

That response is not at all logical. It also suggests that despite you saying you accepted the risk, you clearly did not. And taking the money out within months despite all the warnings about investing being long term suggests that bit didnt sink in either.

Did the market crash coinciding with the same moment I withdrew my money?

The market hasnt crashed. There was a negative period from October to December but did not reach a level high enough to be classified as a crash. Broadly a 16% loss. It needs 20% to be classed as a crash. There have been two periods in excess of 43% loss in the last 20 years. So, your level of loss is quite tiny by comparison.

eels futile to start giving them my money again as it will take an age to get back that £122 loss.

What is your definition of "taking an age"?

cloud_dog

DAE wrote: »

Yeah, I think I've just got unlucky.

It seems in the days between my withdrawal request and the withdrawal going through, my investments took a hit to that tune.

So I never had £500 balance, it just went from ~£3000 straight to £378.

You do understand that you have made an investment in to a socks and shares type investment?

I'm also struggling to understand why, if you identify yourself as an 8/10 for risk, you think the drop is particularly significant? Perhaps your 8/10 risk profile, i.e. happy with very high risk investments, isn't really as high as you think? Perhaps you're more of a 3 or 4/10 type person?

eskbanker

cloud_dog wrote: »

You do understand that you have made an investment in to a socks and shares type investment?

Yes, OP really put their foot in it!