HELP! I think we've lost lots of money, what to do now?

rhubarb1

We opened a Legal & General Property Investment Bond last year, we invested £22,200 and have just discovered that after one year the value is now £17,882. If we withdraw now, it would cost us another 6% to get our money out. The Bond is a 5 year one with penalities for cancelling before that time. We are not worldly wise in the investment business and wish to goodness now that we'd never bought into it. They are offering new investors a 5% discount to open this Bond, which again comes out of existing customers investment totals.
The signs are bad aren't they?
But what to do now? Should we let it run it's course as they advise, and hope the market bounces back? Or should we cut our losses, take the dramatic loss of value on the chin, and pull out now before things get worse?

Any advice is greatly appreciated as we are in a real dilemma and this money was to be our deposit on any house we bought in the future.

Many thanks.

johnmoney05

Personally will hold another two years or so to see what happen....after all...those funds are for long term rather than a short term.
Just my idea....

adamtango

Don't sell , keep your cool and focus on the long-term.

By selling you are crystalising your loss which in a few years could be reflected on as a poor decision.

Best wishes Adam

rhubarb1

Thanks for the replies! But the investment is tied up in freeholds and leaseholds of business premises and I'm concerned that no-one is buying in these anymore and we may end up losing more money than we would if we pulled out now. I suppose I just want to minimise any losses. I'm shocked it has lost so much in one year, and with them offering discounts for new investors, it shows that not many people are taking them up on their investment bond anymore, so perhaps they know it's on a losing streak?

[Deleted User]

There are a lot of knowledgeable people on here but from what I've read and learnt investing is for the long term, i.e. 5 years + and you'll need to be able to accept a certain amount of risk on the money invested.

I'd say leave it where it is but then again no one can predict what will happen to the markets in the next 6 months - 2 years and it also depends on how desperately you need the money for a deposit...

Maybe someone with more knowledge of the Legal & General Property Investment Bond can advise?

rhubarb1

Thank you.

Sorry for sounding so dumb, but I don't normally do investments, on the very basis that I don't know an awful lot about them.

I'm just trying to weigh up the risks and work out what is the best thing to do. We can ill afford to lose much more money, if we pull out now we've just kissed goodbye to £6grand. However, like you say, this might be a bit hasty. The guy who sold it to us told us just 3 months ago that the Bond was stable and not to panic, yet he must have known then how much it was losing or would lose. So we don't trust our man very much, and obviously he would tell us that the market will bounce back, he gets commission no doubt for having our money stay right where it is.

I am panicking however as I'm looking at the economy both here and in the US and I feel that an investment in business property, both in leasehold and freehold, is an unwise investment. But we've done it now and the question is whether to be brave, hold our nerves and see what happens, or pull it out now.

I appreciate your responses, you guys know much more about this than we do!

dunstonh

First thing to do is realise that the bond and the funds you choose to invest in are two different things. The L&G bond has a hundred or so investment funds with free switching between them.

We are not worldly wise in the investment business and wish to goodness now that we'd never bought into it.

I agree. It was a bad investment decision and it was almost certainly a bad choice of tax wrapper and L&G arent that special on pricing either.

hey are offering new investors a 5% discount to open this Bond, which again comes out of existing customers investment totals.

No it doesnt.

The signs are bad aren't they?

Not really. Could have been worse, could have been better. It had been on the cards for a few years.

Property funds had around 14 years of gains year in year out averaging 10% a year. 2007 was not a good year and the first negative. Things have stabilised somewhat with the last big drops in December and some have called the bottom although there are still other potential problems going forward. Even if this year does see the end of the drops, you are probably only looking as break even-2% this year increasing to 5-7% maybe in a few years. The potential isnt great at this moment in time.

How did you buy the product? Was it through advice using an IFA or was it sold to you by a tied agent or did you buy direct?

Going forward, you almost certainly need to alter the asset allocation of the investments to see any hope of recovery in the short term. However, that still carries risks. There is a cash fund on the product as well as other low risk funds which would could go into but you need to decide if you want to aim to get your money back and possibly still see short term losses or whether you want to aim for lower return stability.

dunstonh

I'd pull out now. It's would be very easy for it to drop another 6% or much more in the next 12 months, and you could offset that penalty in a savings account.

You would take over a year to recover the exit charge let alone trying to get the losses recovered. Telling the OP to cash in the tax wrapper because of the performance of one of the funds is not sound advice based on what we know so far.

and they haven't managed your investment well so far.

On what basis do you say its not being managed well? L&G are mid table on property funds over 12 months.

Morgan2010

rhubarb1 wrote: »

I'm shocked it has lost so much in one year, and with them offering discounts for new investors, it shows that not many people are taking them up on their investment bond anymore, so perhaps they know it's on a losing streak?

Unfortunately with the recent coverage of falls in property prices it's not really that shocking.

Regarding discounts for new investors. If you applied for any investment through an Advisor they will normally be paid commission by the company. What some companies do is offer discounts to customers who apply to them directly. This is normally slightly less than the commission. So they could be making more money from these customers than customers that apply through advisers.

If you take a look at the Legal & General websites investment section you'll see that people applying for ISAs and Unit Trusts in any of their managed trusts receive a discount on the initial charge.

Regarding pulling out remember that you haven't actually lost anything until you take the money out. While it's invested there is always the chance it will go back up. Also before you do decide to withdraw check the terms.I don't know much about L&G bonds but I know withdrawal charges on their other products are on a sliding scale so for every full year you hold the product the charge goes down 1%. So it may be worth hanging on a week or so to pass an anniversary if you haven't had it in the full year (if you think it won't go down more than 1% in that time)

You really need to weigh up what you think is likely to happen. If you think the investment will drop more than another 6% over the rest of the term then you may want to take it out. If you think it's possible that it may go back up or go down less than you'd loss in charges you need to look at what you can get else where.

The other thing to consider is why you had the money in the first place and your attitude to risk. If the product was sold by an advisor and you don't think he took all this into consideration when selling the product then complain.

payless

Did you buy direct or through an adviser...
what % of your total investment portfolio is this bond.

[Deleted User]

sheep sell at the bottom of the market and they buy at the top. Most people are sheep so they crystalise losses. I am not saying that any of this applies to you OP but I am quietly buying. It will be bumpy for some time yet though