Is it too late to switch from gilts and bonds?

Marrad

I have just logged in to my local government AVC account to find that my six-year pot - heavily invested in bonds and gilts - has taken a devastating hit. After paying 52,000 contributions over six years - I have just 43,000 in value. I'm gutted but hands up, my own fault I haven't been taking notice and am now paying the cost with just four weeks to retirement. I'll be ok - I have other savings/better investments. I just want to know whether I should keep the money where it is, hoping that bonds recover: I haven't lost anything until I have taken it out. Or should I just take it out as a lost cause and give it to my financial adviser to invest in stocks?

InvesterJones

Imagine you hadn't invested anything to date, and were now making a new investment of 43,000. Where would you put it?

Marrad

I'm happy with my green portfolio - best thing about it is that it is being managed by someone I trust - not the Pru

Voyager2002

Marrad said:

. I'll be ok - I have other savings/better investments.

In other words, you did what we are supposed to do and had a diverse portfolio. What matters is the performance of the whole portfolio rather than any part of it, and from that point of view your investment strategy worked.

Be thankful that you didn't keep the whole lot in gilts.

JohnWinder

Reading your post four years ago, you said ‘I guess I am paying all that money (~£7k/year - me) for the still, calm voice of my adviser telling me not to worry - everything will be ok in the end.’ So, what are they saying now about your AVC investment?
To be fair, can you expect your readers to offer a sensible opinion about whether you should hold or sell your AVC investments knowing so little about your circumstances, when you already know the extent and depth of enquiry you advisor made of you four years ago as a basis for their advice?
You and your spouse chose the route of ‘trust the professionals’ four years ago when you might have also started on a four year journey to understand personal investing and the nature of different asset types, a journey over four years which could have been leisurely and would by now have been empowering. But if you’re like the average person and will spend twenty years in retirement, and in your case leaving some investments for the next generation, then you still have plenty of investing time ahead to now justify spending a year or two educating yourselves, including for the benefit of your children whom you can guide on their journey. Perhaps go to your local librarian to ask for some assistance in finding good sources of information, or follow forums like this and pick it up a lot less efficiently.
We’re all lamenting bond returns just now, so you’ll find plenty written here to help fathom that out by me and others.

masonic

Is this AVC fund going to be used to buy an annuity? If so, then you've invested in a manner that de-risked the annuity purchase. Your gilts and bonds have fallen in value, but annuity rates are linked to bond prices and have gone up significantly recently, so the purchasing power of your AVC fund is probably about the same. Your adviser would be in a position to explain this to you in more detail.

Bonds are not going to 'recover' in the sense that they've just returned to something approaching fair value after being in a bubble owing to the historically low interest rates. It is unlikely we'll see near zero interest rates return any time soon, and certainly not in the next few weeks.

Marrad

JohnWinder said:

Reading your post four years ago, you said ‘I guess I am paying all that money (~£7k/year - me) for the still, calm voice of my adviser telling me not to worry - everything will be ok in the end.’ So, what are they saying now about your AVC investment?
To be fair, can you expect your readers to offer a sensible opinion about whether you should hold or sell your AVC investments knowing so little about your circumstances, when you already know the extent and depth of enquiry you advisor made of you four years ago as a basis for their advice?
You and your spouse chose the route of ‘trust the professionals’ four years ago when you might have also started on a four year journey to understand personal investing and the nature of different asset types, a journey over four years which could have been leisurely and would by now have been empowering. But if you’re like the average person and will spend twenty years in retirement, and in your case leaving some investments for the next generation, then you still have plenty of investing time ahead to now justify spending a year or two educating yourselves, including for the benefit of your children whom you can guide on their journey. Perhaps go to your local librarian to ask for some assistance in finding good sources of information, or follow forums like this and pick it up a lot less efficiently.
We’re all lamenting bond returns just now, so you’ll find plenty written here to help fathom that out by me and others.

I am so glad I did ask an adviser to organise my finances because - as a result - I have been able to help each of my children buy a house and I still have enough money to keep me in comfortable retirement. I hate to think what would have happened if I had tried to go it alone. I know that some people are brilliant at it. I'm just not interested enough and don't have the time. Having said that I did keep paying into my AVC pot in the stupid belief that it was somehow magically protected and I'm paying for that now.

Marrad

masonic said:

Is this AVC fund going to be used to buy an annuity? If so, then you've invested in a manner that de-risked the annuity purchase. Your gilts and bonds have fallen in value, but annuity rates are linked to bond prices and have gone up significantly recently, so the purchasing power of your AVC fund is probably about the same. Your adviser would be in a position to explain this to you in more detail.

Bonds are not going to 'recover' in the sense that they've just returned to something approaching fair value after being in a bubble owing to the historically low interest rates. It is unlikely we'll see near zero interest rates return any time soon, and certainly not in the next few weeks.

Thanks so much - I will explore the annuity avenue.