Should I be expecting more from my investments

Jenkachu

Hi,

I have an EQ ISA (Positive Impact Cautious Plus) and have about £45k in it. I have had the account since Dec 20 and pay in £500 per month. On top of that, I have paid in two lump sums of £10,000ish in mid-2021 and mid-2022.

Overall my profit is sat at negative £500, ie I've made a loss over that period.

I was expecting to be sat nicely in the +ve after 3 years of investing, and I regularly read in the papers of funds with 5% or more yearly profit even during the turbulent times the market has gone through.

Are my expectations wildly off? Am I just throwing good money after bad by continuing to invest? My logic is that as I have invested over time, I have been buying "cheap" shares while the markets are performing poorly and so transferring now to a different ISA would be throwing that "advantage" down the drain.

I'm in no hurry for the money per se and can afford for it to remain invested for years to come. I just want to know that it is invested sensibly...

Thanks

Jenks

Albermarle

I have an EQ ISA (Positive Impact Cautious Plus) 

From its name and from the poor results, I can guess that this fund is low in equities ( shares) and high in bonds.

Whilst equities have been up and down ( as normal), overall they have done OK since 2020.

However bonds have been through a once in a lifetime torrid period, especially during 2022 and have only recovered a bit since. It is mainly due to the rise in interest rates from near zero, which affected bonds very negatively.

So in fact cautious funds, with a high proportion of bonds ( that normally have pretty boring performance) have done a lot worse than ones containing more volatile equities.

My logic is that as I have invested over time, I have been buying "cheap" shares while the markets are performing poorly 

That would have been the case if your fund had a higher % of equities in it, but I suspect the % is rather low and that is where the problem has been.

eskbanker

Jenkachu said:

I was expecting to be sat nicely in the +ve after 3 years of investing, and I regularly read in the papers of funds with 5% or more yearly profit even during the turbulent times the market has gone through.

There will be plenty of funds with such growth, but also plenty like yours - the key thing being that they won't all be comparable in terms of risk, strategy, allocation, etc, so you can't just pluck figures like that out of articles and use them as a meaningful benchmark.  Lower risk will usually align with lower reward anyway, but, as above, this effect has been exacerbated in recent times with unusually poor bond performance.

Beddie

It sounds like you went too cautious, as others have said above bonds had a very bad 2022. I had bonds in my portfolio and they did poorly too. They are doing better now though. If you can leave the money for many years, maybe up the risk a bit, about 60/40 equities/bonds perhaps? 

dunstonh

I have an EQ ISA (Positive Impact Cautious Plus) and have about £45k in it. I have had the account since Dec 20 and pay in £500 per month. On top of that, I have paid in two lump sums of £10,000ish in mid-2021 and mid-2022.

You have three reasons for your returns in those two sentances.

1 - Sutainable investing (historically underperforms conventional investing) 
2 - Cautious investing during a period that favoured equities, which you are light on and bonds are down on what they were 7 years ago (gilts suffering their worst period in over 100 years).
3 - Regular contributions going in whilst markets were falling with lump sums made just before the fall and just after the start of the fall (with the worst to come)

Overall my profit is sat at negative £500, ie I've made a loss over that period.

Which is understandable given the period and your choices.

I was expecting to be sat nicely in the +ve after 3 years of investing, and I regularly read in the papers of funds with 5% or more yearly profit even during the turbulent times the market has gone through.

You mention "market".  Which market are you are referring to?   If you mean stockmarket, then you have to be in it to benefit from it.   The major growth area in this cycle has been US equity and you only have 26% in that.

 My logic is that as I have invested over time, I have been buying "cheap" shares while the markets are performing poorly and so transferring now to a different ISA would be throwing that "advantage" down the drain.

Again, you mention markets and buying cheap shares but the majority of your investments are not in shares.  They are in low return bonds.

Jenkachu

Thanks all of you. FWIW the split is 50% Equities (of which 50%ish are US-based), 42% Bonds, 5% Alternatives and 3% Cash.

Seems like with a bit of hindsight I could have made some better decisions. At least from my understanding of your advice it is my choices that have led to the situation I am in rather than having picked a particularly bad company / fund to go with.

Again, thank you all.

eskbanker

Jenkachu said:

Seems like with a bit of hindsight I could have made some better decisions.

Investing is always an entirely different exercise when looking backwards at what could have been done!

Prism

Had the situation been different (no high inflation and interest rate rises) you would likely have seen a different level of performance. No one was to know what would happen in 2022 to 2024.

Going forwards, we might have a recession and stock market crash where your fund could well protect you pretty well. Or we might have years more equity gains which means you could underperform. However it would be unlikely (though possible) to see a replay of the last few years which have hit your overall performance.

Albermarle

Jenkachu said:

Thanks all of you. FWIW the split is 50% Equities (of which 50%ish are US-based), 42% Bonds, 5% Alternatives and 3% Cash.

Seems like with a bit of hindsight I could have made some better decisions. At least from my understanding of your advice it is my choices that have led to the situation I am in rather than having picked a particularly bad company / fund to go with.

Again, thank you all.

In fact with 50% equities it is not as cautious as some cautious funds which can have equity levels as low as 20%. In fact it is more a medium risk fund. So from that point of view it is not as bad as I first thought. I think though your timing has been a bit unlucky as well. 

dunstonh

Jenkachu said:

Thanks all of you. FWIW the split is 50% Equities (of which 50%ish are US-based), 42% Bonds, 5% Alternatives and 3% Cash.

That is the current position.   It has shifted since you held it.

For example, it is 50% equities now with 26% North America (which includes Canada) but just over a year ago it was 36% equities with N America just 17%.

coyrls

It looks like they've shut the stable door, then.