Vanguard Stocks and shares ISA?Life Strategy Blended LOW RISK Fund .. Poor Performance

thomastt3722

We have had these Investments since 2020 and at first they gave an adequate return,In 2023 we have seen a loss in both investments,with no sign of any improvement.Whist we understand that these are considered long term investments,there comes a point when we must make a decision as to whether we should cut our losses and move our money elsewhere.The Fund Managers are still taking their management fees even though the investments were chosen as low risk.Does anyone else have any views or advice on this way of thought?  [Deleted by Forum Team]

400ixl

What funds are you going to move them to which are performing better? You will most likely find that other similar funds are in exactly the same position.

The markets aren't performing as well this year as they have in others, but that is part of the cycle with Stocks and Shares. It is best not to sell when they are depressed, do you need the money now?

Albermarle

thomastt3722 said:

We have had these Investments since 2020 and at first they gave an adequate return,In 2023 we have seen a loss in both investments,with no sign of any improvement.Whist we understand that these are considered long term investments,there comes a point when we must make a decision as to whether we should cut our losses and move our money elsewhere.The Fund Managers are still taking their management fees even though the investments were chosen as low risk.Does anyone else have any views or advice on this way of thought?  Michael Hirons

The problem is that low risk funds typically hold a low % of equities ( shares) and a high % of fixed interest securities. These are things like government gilts and corporate bonds.
Although equities are volatile, the fixed interest part tends to be more stable. However the last two years have seen a big crash in the value of Gilts and bonds, due to very unusual conditions in the financial markets.
So low risk funds have suffered badly in a probably once in a lifetime scenario.
See this article from 11 months ago and it has not got any better since.
City in shock as £1.3 trillion is wiped off value of UK bonds in record sell-off (msn.com)

metrobus

We keep getting told to play the waiting game, but with no sign of anything improving there must be a time to get out of them. 

1 year ago we were being told the previous year’s performance was a one off, now we are being told again that last year’s performance was also a one off, my guess is that this time next year we will be being told exactly the same thing😂😂😂

InvesterJones

metrobus said:

 

1 year ago we were being told the previous year’s performance was a one off, now we are being told again that last year’s performance was also a one off, my guess is that this time next year we will be being told exactly the same thing😂😂😂

I would stop listening to anyone who is claiming they can see the future!

The circumstances whereby bond funds perform badly are well understood, so whenever those circumstances apply funds with a high proportion of bonds will perform badly.

Dh6

3 years is not long term in investing. 

Bostonerimus1

What fund do you actually own? If it is one marketed as low risk then in will have a large proportion of bonds and the conventional wisdom that bonds are "low risk" has been confounded in the last couple of years by large interest rate rises and Liz Truss. It will take several years for such funds to recover, but you should probably take this as a buying opportunity rather than selling and realizing your losses. You might want to look at your asset allocation with an eye towards diversity to mitigate falls in any one sector.

Eyeful

You should be thinking of 10 years when you invest.
What is the Share/Bond split of your particular VLS fund?
What makes you think that the next fund you will pick would do any better than your current fund?

Your post suggests that you are new to investing. If that is the case, take a look at the video below.  

    https://www.youtube.com/watch?v=lGQ9KyQq8Jw

dunstonh

Bostonerimus1 said:

What fund do you actually own? If it is one marketed as low risk then in will have a large proportion of bonds and the conventional wisdom that bonds are "low risk" has been confounded in the last couple of years by large interest rate rises and Liz Truss. It will take several years for such funds to recover, but you should probably take this as a buying opportunity rather than selling and realizing your losses. You might want to look at your asset allocation with an eye towards diversity to mitigate falls in any one sector.

I think it is time to stop blaming Liz Truss.   Gilts had fallen half their amount before she was in power and gilts are currently worse than they were after she was removed from power.    She is also not responsible for US Treasury stocks or other Global Government bonds suffering falls (and same are starting to show early signs that they could match UK Government bonds and that those were actually ahead of the rest in the downward trend).     The end of quantitive easing and the rising inflation that followed is what really burst the bubble.

JohnWinder

I feel there are several cogent reasons one might ‘cut their losses’ and change investments. Firstly, your previous choice was crazy-stupid based on ignorance or bad advice etc, and now you understand what you’re doing; I doubt that’s your case, on both counts. Secondly, your projected savings rate won’t quite make the retirement nest egg you need, so you go in for some riskier than otherwise choice of investment(s) hoping to make up the difference, but knowing it could back-fire forcing you to sell while you still have a decent ‘floor’ under your nest egg. Zwelcher suggests this approach, it doesn’t suit all folk, but you’ll know if it’s about you. Thirdly, you just got a six months to live diagnosis, and it’s time to start spending; you?

Short of getting a good understanding of personal investing if you don’t have one, most useful would be to familiarise yourself with some history of investment returns, both over the long term like 100 years and over the many shorter 5, 10 or 15 year periods within those 100 years. A good place to see that in starkly visual graphs is https://www.portfoliovisualizer.com/backtest-asset-class-allocation

Choose US stocks, choose foreign stocks, choose bonds, choose cash, choose different mixes of all, choose short and long periods starting at different times. Then do it all with inflation. What you’ll see is a long term trend of stocks returning more than bonds, and bonds more than cash; stocks more volatile than bonds, and bonds more than cash. You’ll also see 10 or 15 year periods when stocks returns less than cash, and bonds more than stocks. The results are just all over the place over shorter periods like 10 or 20 years which is relevant to many of us.

Do that and you won’t be a bit surprised by your Vanguard ISA.

And yes, that’s the nice thing about being a fund manager, win or lose you get paid. No wonder there are 20-30,000 funds in UK, not to help you or me but to make sure there’s one attractive to every single one of us so none of us go untapped for their income

VXman

I have had similar thoughts as the OP. My thought is..

I could sell and make a loss but put them into 6% fixed savings or 5% ISA and make something back.

Or - leave them floundering for yet another year. I understand long term and have no immediate need for the the money but with current world events I wonder if we are ever going to get out of this down turn. 

Also, if you can get 6% in a savings account why isn't a low risk fund doing better?