Bad Advice. Can I do anything?

Ivkoto

How did you pay over £90k in S&S ISA? You restricted to £20k a year.
Is it by any chance GIA? 

masonic

bobdisk said:

But what is considered to be the "long term" , how many years? Is this likely to firstly, recover to the original amount within a couple of years, I know it cannot be guaranteed, and then make a profit. but all I see is loss. 

It's not clear what you are invested in, but in terms of stockmarket crashes, the recovery could come over 1 year, a few years, or in extreme circumstances over 10 years. The longer you hold, the greater your probability of making an inflation beating return.

masonic

Ivkoto said:

How did you pay over £90k in S&S ISA? You restricted to £20k a year.
Is it by any chance GIA? 

It would have been transferred in from a cash ISA.

dunstonh

I was advised by my companies Financial Adviser to put my saving from low interest cash ISA and savings accounts into an investment ISA, (£90,331) and investment savings (£29,400) called Aviva Wrap, running Fairstone Passive 4 Powered by Vanguard.

First thoughts are that its very mainstream and normal. Thats a good thing.   Aviva wrap is the platform.   Vanguard will be the investments and Fairstone is the advice company controlling the portfolio using Vanguard funds.

 Its been there for almost one year now since October 2021, and the investment has lost £4,124, down to £25,276 and the ISA has lost £13,672, down to £76659.

October 21 was around the peak of the markets.   2022 YTD has been a loss period.   So, the loss levels are to be expected and quite normal.

I can see that all both will do is carry on losing money, 

Why do you think that?   It would be a unique period in history if that was to happen.

Bad Advice. Can I do anything?

Nothing you have said indicates any bad advice.     

When you invest, you will have good years, bad years and nothing years. i.e. a positive return in some years, a negative return in some years and a year that remains largely neutral.         2022 is a negative year to date.   

I accepted that it could go down somewhat as well as up, but it was not supposed to lose as much as it has, over this short time, without going up at all. 

You are only 14% down.  That is in keeping with a cautious risk profile.  Unfortunately, in this period, the lower-risk investments have taken the brunt of the losses as a rare event has occurred but it is within the expected periodic loss levels for cautious.

I do not know what is considered "long term"  It is a "medium risk" type of account.

Medium risk would have around 20% loss potential during larger negative events.   Long term is typically 15+ years. However, there is no hard definition.

There have been only a handful of periods where losses are still the position after 5 years.   This is why you often see a minimum term of 5 years is recommended.  However, the longer the better as time dilutes the risk.

. It seems as though its all concentrated on one investor, Vanguard.   I do not think that is a good thing.  

Vanguard are the fund house but its not concentrated on them.  They just administer the investments within each fund. 
It not a bad thing.

 I do not fully understand how these investments work. I would have still had that amount, even if it has not earned much interest. I was told that it is not a good thing to have that sort of amount sitting there , it should be made to work.

Its easy to feel like that in your first negative year.  Negative years do not happen often (about 1 in 5 years is a negative year).   You just just seen it instantly after investing which is unfortunate.  However, you would have seen it at some point. That is inevitable.    Here is an idea of how medium risk could have done over the last 20 years.


2002, 2008 and 2020 had bigger loss periods in them than current. So, if you had invested in 2007, you would have seen losses early on just like you have.   Then look at the years that followed. Same with 2002 and 2020 recovered within the calendar year and doesn't even show when you look at calendar years in isolation.   You need to average out the years and not look at gain years, nothing years or loss years in isolation.

Rollinghome

Nebulous2 said:

Rollinghome said:

Nebulous2 said:

It's certainly gone if you sell. Then you could possibly add another 10% loss on top for inflation over the next year if you are in cash. 

There isn't an easy way out I'm afraid. 

Didn't the adviser discuss the long-term nature of what you were doing, your attitude to risk, and the possibility of fluctuating prices, before you bought? 

Just to be clear. The value of the investment will also have lost a further 10% in real terms too.  It's often very misleadingly suggested on this board that real-terms loss due to inflation magically doesn't apply to equity investments. It does.

To the OP.  That is the nature of investment versus cash savings. The return on investments can never be predicted. All we know is that, historically, equity investments have provided a better return than cash savings over the longer term.  Whether your investments are suitable for you depends on your very specific circumstances, details of which you may not want to put on a public message board.

From the scant details you have given, the advice seems fine, but no one can tell you where your investments will go from here, or when.

I think you may have misread or not understood the bit you have highlighted.  It was projecting forward. You have no idea whether equities will fall behind inflation over the next year or not. Going by the forecasts its very likely that cash will. 

Many investors measure their equity returns net of inflation - and are aiming for a percentage above inflation.  

Precisely. So why did you say "if you are in cash"?   Why "add another 10% loss on top for inflation over the next year if you are in cash" but not for loses on equities.

Whether you are holding cash or equities, the valuation today is worth around 10% less in real terms than it did a year ago.  None of us know whether equities will out-perform cash, or under-perform as they have YTD.  We don't know what the interest rate will be over the coming year nor the return on equities.  We do know that returns from any source are always reduced in real-terms by inflation.

RobM99

"Bear in mind there will be an unexpected global pandemic and a war in Europe"  predicted nobody on the planet in 2018 or whenever you invested. Mine went up 6.5% before Covid, it's now down 4% from original. That's investing!

Type_45

And so it begins.

masonic

Type_45 said:

And so it begins.

Nothing new about that. Articles like this pop up time and time again.

bobdisk

masonic said:

Ivkoto said:

How did you pay over £90k in S&S ISA? You restricted to £20k a year.
Is it by any chance GIA? 

It would have been transferred in from a cash ISA.

Yes, It was transferred from a cash ISA I had from almost when ISAs started, putting regular contributions in up to the annual limits at the time.The investment amount was an ordinary savings account. 

Nebulous2

Rollinghome said:

Nebulous2 said:

Rollinghome said:

Nebulous2 said:

It's certainly gone if you sell. Then you could possibly add another 10% loss on top for inflation over the next year if you are in cash. 

There isn't an easy way out I'm afraid. 

Didn't the adviser discuss the long-term nature of what you were doing, your attitude to risk, and the possibility of fluctuating prices, before you bought? 

Just to be clear. The value of the investment will also have lost a further 10% in real terms too.  It's often very misleadingly suggested on this board that real-terms loss due to inflation magically doesn't apply to equity investments. It does.

To the OP.  That is the nature of investment versus cash savings. The return on investments can never be predicted. All we know is that, historically, equity investments have provided a better return than cash savings over the longer term.  Whether your investments are suitable for you depends on your very specific circumstances, details of which you may not want to put on a public message board.

From the scant details you have given, the advice seems fine, but no one can tell you where your investments will go from here, or when.

I think you may have misread or not understood the bit you have highlighted.  It was projecting forward. You have no idea whether equities will fall behind inflation over the next year or not. Going by the forecasts its very likely that cash will. 

Many investors measure their equity returns net of inflation - and are aiming for a percentage above inflation.  

Precisely. So why did you say "if you are in cash"?   Why "add another 10% loss on top for inflation over the next year if you are in cash" but not for loses on equities.

Whether you are holding cash or equities, the valuation today is worth around 10% less in real terms than it did a year ago.  None of us know whether equities will out-perform cash, or under-perform as they have YTD.  We don't know what the interest rate will be over the coming year nor the return on equities.  We do know that returns from any source are always reduced in real-terms by inflation.

Two possible scenarios:- 

He sells his shares and moves to a cash ISA which is what he proposed. I was saying that if he does that he will lose out by the difference between inflation and what he gets on his cash ISA in the next year. 

He keeps his equities. They could go down further, go up but not as much as inflation, break even or exceed inflation. Over the long-term investors expect to beat inflation, that's why they do it. Over the very long-term, with a diversified portfolio they pretty much always have. 

You then responded by saying:-  "The value of the investment will also have lost a further 10% in real terms too" 

You seem to be agreeing that we cannot predict what the stock market will do - but then you told him he will lose 10% in real terms.  

The bit of yours in bold - no it isn't. If you had £100 in cash and £100 in equities a year ago and still have the same today, then yes both have lost. If you now have £102 in cash and £110 in equities, then your equities have held their own. If you have £115 in equities today, your equities have outperformed inflation.