What should I do about bond investment

Susan1942

I hold several investment bonds and was checking their current valuation this afternoon. 2 have lost around £1000 -1500 each but one had dropped significantly.
The original investment was £30.000 and at one time was up to £56,000. pre Covid  The last valuation in April was £49,000 today it is just over £42,000. 
If I cashed the bond in I don't know what I would do with the money.  I did take £5000 from the bond around 6-7 years ago. 
I was shocked today as I expected it.to have dropped but not by so much. Incidentally I am 80 but in good health. I own my property so no mortgage etc.
I would appreciate some advice. 
Sue 

InvesterJones

All investments come with a risk of falling in value, hopefully this was made clear to you when you bought the bonds. You haven't done anything wrong however - most people will be seeing the same performance from their bonds too, due to the fairly unusual set of circumstances we find ourselves in with respect to inflation and rising interest rates.

I cannot give advice as to what you should do - that is best saved for professionals who have completed the required training and understand the regulatory framework for any advice. The traditional guidance for people to hold bonds when they may wish to draw from the investment in the short-medium term still applies, and while it may seem painful, other asset classes have suffered as well, and likewise cash isn't making a huge amount of interest either.

Susan1942

I don't need to take any income from them and I just hope that I would be able to leave something for my family . I have got a reasonable amount of money in my current account and as you say there is little or no interest in cash. I think I just need to dig in and leave things and see whether things recover in the long term 

masonic

An investment bond could contain anything, so it is hard to comment on the performance. It doesn't seem out of the ordinary given most investments have fallen during 2022. There are potentially surrender charges and tax consequences for cashing in. It's quite a complex area, so needs careful consideration. If you are able to keep it invested then there's no reason to think it wouldn't recover in the long term.

dunstonh

I was shocked today as I expected it.to have dropped but not by so much. Incidentally I am 80 but in good health. I own my property so no mortgage etc.

Basically, you are seeing the large gains made following the credit crunch (the reduction of interest rates, low inflation and QE) being unwound and moving back to where they usually are.

Gilts and bond prices generally go in a wavy line but do not head upwards over the long term if you do not reinvest the income.  That wavy line plays out over a decade or two.   

Bonds have their place in a balanced portfolio but should not be held in isolation.   If you hold them in isolation, then that increases your risk.

Here is an example of a unit price with income taken (or invested elsewhere - i.e. not included) going back to 95.  You can see the recent drop back but you can also see how much of a bubble it was in post credit crunch. (chart is of a real fund but unlikely to be the fund you are in but used as a broad illustration of how and why)

masonic

dunstonh said:

Bonds have their place in a balanced portfolio but should not be held in isolation.   If you hold them in isolation, then that increases your risk.

Don't investment bonds tend to contain a range of assets, not just fixed interest?

Susan1942

Thank you all for your comments and advice.  As I don't need the money as suggested it is probably best to leave things as they are and hope the downward trend does not continue in the long term.  

dunstonh

masonic said:

dunstonh said:

Bonds have their place in a balanced portfolio but should not be held in isolation.   If you hold them in isolation, then that increases your risk.

Don't investment bonds tend to contain a range of assets, not just fixed interest?

Investment bonds are a wrapper which can offer a limited range to whole of market.   You can pretty much hold what you like in an investment bond.

I glossed over the term "investment bond" and assumed it was more about bonds as the scale of the losses were more typical for bonds than for equities.   Maybe Susan1942 can clarify what the investment fund(s) are?

Susan1942

One bond which was taken with Sun Life in 1997 Now AVIVA  
Tells me the fund name it says 
AV DEFER DISTAL dropped by list over £1000 

Another says Investment Portfolio Bond 
It is also with Aviva contents applied to 60 identical independent policies.  This is the one has dropped by just over £1000. This was Friends Life originally  now Aviva

I have a letter with this that tells me that they were closing Aviva Life Artemis UK special situation FPL Fund 
Says Aviva Life Global income FPS

Aviva Life Aegon Ethical Equity FPL

I am having a look through some other paper work here

One has dropped the most at over £7500 is with Phoenix Life 
Think this was Scottish Mutual.
The bottom line is that I probably just sit tight.  I did some decorating last Autumn and spent around £20,000 without taking anything from these bonds 
I did take £5000 from this and the Aviva bond 7 years ago.to help towards the cost of a new kitchen..
I appreciate your views on this 
Thank you 
Sue 

masonic

AV DEFER DISTAL is probably Aviva Life Deferred Distribution AL/PSB, which looks to be 33% UK shares, 20% international shares, and most of the rest in UK corporate bonds. It seems to have performed roughly in line with its sector. It is only down about 6% from its previous peak. Aviva Life Aegon Ethical Equity FPL is all invested in the UK stockmarket. I can't ID the others, but it is likely these are equities or mixed investments too.

It would generally make sense not to be influenced by short term falls if you intend to keep this money invested for the long term. It doesn't look like the source of these losses was particularly attributable to rising interest rates; more down to the crash in equities we have seen during the first half of this year.

Susan1942

Masonic. Thank you for your advice..I am not likely to need any of the money in these bonds.
Two of these bonds started in 2003 I think One which had £31,000 dropped within the first year to £22,000. I was in a panic but my bank manager said to leave it and let it recover which it did.
The one which has fallen most performed really well much better than the others.  This is the first time it has taken a tumble 
As you say I won't do anything.
Thanks again I appreciate the advice 
Sue