I’m struggling – risk of losing my capital as margin call looms…

MarkK73

Thanks for taking the time to read this.

The recent drop in the markets has seen my investment drop considerably. I was prepared to sit it out as I was saving for a deposit on a house, but now the slide has reached a point where I am facing the prospect of a margin call on my positions.

In short, I need advice on how to avoid losing my capital. 

All I need is funds (£20,000) to act as additional cover until the markets recover once again - six months? I will not touch the money, and will look to return it once the investment returns to profit. I have approached my bank, and they are not able/willing to help. I do not know where to turn next. The thought of losing my savings is leaving me feeling deeply anxious. 

Is there any help out there or am I destined to lose my savings?

Background: 

I am 47 years old, and am saving hard to get enough money together for a deposit on a house. My plan is to get a mortgage when I am 50 year old, and finish paying when I am 70.Alas, I have not been in a position to inherit any capital that I could use to buy a house earlier. I want to buy a house so then I have something to leave her and she does not have to experience the same struggles as me.

In order to get enough (£40,000), I needed to make my saving work for me. I invested it in equities rather carefully but the events of 2020 have been unprecedented. If I get through this then all my savings are going into premium bonds and I will just hope I win one of the prizes!

However, at the moment I find myself in a pickle. Feeling all of the worries and anxieties that many people are feeling at this time. I am hoping this plea is being read by wise and experienced minds who can help me out of this very worrying hole.

Thanks so much for your time...

kaMelo

I don't know if you meant it to but it almost sounds like a begging letter. Investments by nature go up and down, there are no guarantees.
There is only two ways to increase available funds that I know of. Earn more and spend less. If things are that tight try on the Debt Free Wanabee forum for help.

Jeremy535897

You haven't just invested in equities, you have been doing it on margin, and in these times, realistically nobody is going to lend you money to pay margin calls.

MarkK73

Thanks for the feedback. Not a begging letter. Sorry if it sounded like that, kaMelo. My mess, I need to sort it. I was looking for advice, that's all. Jeremy - thanks for the honest assessment. That was my fear but was not willing to face it. Lessons learned, and all that, eh?

Thrugelmir

To err is human. Learn from the experience and move on. 

Jeremy535897

MarkK73 said:

Thanks for the feedback. Not a begging letter. Sorry if it sounded like that, kaMelo. My mess, I need to sort it. I was looking for advice, that's all. Jeremy - thanks for the honest assessment. That was my fear but was not willing to face it. Lessons learned, and all that, eh?

I'm sorry I can't be more positive, but that is the reality. Do something before you get into debt.

MattMattMattUK

It is unlikely that the markets will recover any time soon, with the damage of Covid having been priced in and the impact of any Brexit deal (or lack of) causing even more damage starting in January. I would not expect any kind of real growth until 2022 at the earliest. As Jeremy says you have not made an investment, an investment can rise and fall, but what you have done is place a bet on the markets, as is the risk with any gambling you can lose it all. Banks will not lend for gambling or any other high risk behaviour. You need to decide whether you should close your position now and cut your losses, throw more money down the drain in a sunk cost fallacy or if you think the markets will genuinely rise, but there is a reason futures and bonds are priced as they are.

MarkK73

Jeremy535897 said:

MarkK73 said:

Thanks for the feedback. Not a begging letter. Sorry if it sounded like that, kaMelo. My mess, I need to sort it. I was looking for advice, that's all. Jeremy - thanks for the honest assessment. That was my fear but was not willing to face it. Lessons learned, and all that, eh?

I'm sorry I can't be more positive, but that is the reality. Do something before you get into debt.

Thanks again, Jeremy. The investment was ring fenced as savings and not part of my day-to-day finances. I will not fall into debt, just lose about half of my savings as I close positions at a loss. Downside is that it buggers up my hopes of being a first-time buyer at 50 years of age!

MarkK73

MattMattMattUK said:

It is unlikely that the markets will recover any time soon, with the damage of Covid having been priced in and the impact of any Brexit deal (or lack of) causing even more damage starting in January. I would not expect any kind of real growth until 2022 at the earliest. As Jeremy says you have not made an investment, an investment can rise and fall, but what you have done is place a bet on the markets, as is the risk with any gambling you can lose it all. Banks will not lend for gambling or any other high risk behaviour. You need to decide whether you should close your position now and cut your losses, throw more money down the drain in a sunk cost fallacy or if you think the markets will genuinely rise, but there is a reason futures and bonds are priced as they are.

Thanks, Matt. Good, objective advice. One I would support if I read it being applied to another investor. I am feeling a little foolish to find myself in such a situation. My only defence is that I needed to make my savings work hard in order to have enough for a deposit in two years time. I guess this made me have distorted perceptions, certainly a distorted perception of risk. I feel ashamed, frustrated and sad. But the good thing is that it does not affect my day-to-day finances... so I was an idiot, but not a complete idiot!

MattMattMattUK

@MarkK73
It is very hard, very clever people often fall into a sunk-cost fallacy situation. There are always alternatives, you might have already lost the money you gambled, but you can not change the past and over the next two years you may well still be able to get a reasonable deposit together, Help to Buy may be worth a look for example. Having £20k debt and no savings would be a worse position than no savings and no debt, but only you can decide what your appetite for risk is over the next two years. I am naturally a risk averse person, it has meant that I have not always taken some profitable opportunities, but it has also meant I have stayed away from some opportunities which would have lost me money as well, I do not know where I would be on balance. 

The only real advice I can give you is evaluate everything as if you are making the decision now. Would you gamble that £20k based on current conditions, is that debt (even if you can get the money) worth it, would using any liquid savings you currently have and using HTB now, rather than in two years time be a better choice etc.

MarkK73

MattMattMattUK said:

@MarkK73
It is very hard, very clever people often fall into a sunk-cost fallacy situation. There are always alternatives, you might have already lost the money you gambled, but you can not change the past and over the next two years you may well still be able to get a reasonable deposit together, Help to Buy may be worth a look for example. Having £20k debt and no savings would be a worse position than no savings and no debt, but only you can decide what your appetite for risk is over the next two years. I am naturally a risk averse person, it has meant that I have not always taken some profitable opportunities, but it has also meant I have stayed away from some opportunities which would have lost me money as well, I do not know where I would be on balance. 

The only real advice I can give you is evaluate everything as if you are making the decision now. Would you gamble that £20k based on current conditions, is that debt (even if you can get the money) worth it, would using any liquid savings you currently have and using HTB now, rather than in two years time be a better choice etc.

Thanks again for the considered thoughts, Matt. You're right, it is better to have no debt. A silver lining that I will cling to while the sting of losing a sizeable chuck of savings is still painful!

I did open a HTB ISA when they were announced by Mr Osborne, hence me waiting two more years before looking to buy (the max you can pay in is £200/month), which is why I was using other, higher risk, areas with some savings that were left over.

It was the news of the 5% mortgages being discontinued by money lenders that spooked me... I felt I needed to boost my savings in order to be in a better position when it came to securing a mortgage.

From now on, the surplus savings are going into premium bonds!