Maths and investments

pkpk · 24 October 2019 at 1:30PM

I have blindly paid £50 a month into a Natwest Stocks & Shares ISA for 10 years.
The total investment is 5700 and it's currently worth £8451.

I'm awful at maths and have buried my head in the sand with investments but trying hard to make some progress.

I think this is a 48.2% return over the 10 year period. Would this be considered a terrible investment? I haven't looked at it for many years and am currently looking at investing it elsewhere.

Thanks
PK

Brilley · 24 October 2019 at 2:04PM

..according to my rather poor maths that's around 6.5% overall annual return, so probably not too bad compared with normal "bank/savings" rstes?...although I am sure some people will tell you they have achieved significantly better through investing..?

Malthusian · 24 October 2019 at 2:09PM

It's better than 48.2% "over 10 years" because most of your money has not been invested for 10 years.

I make the Internal Rate of Return to be 8.2% per year. So certainly not a terrible investment. How good it is depends on what funds you actually invested in.

*edit* I used Excel's XIRR function, not sure what Brilley is using.

Tom99 · 24 October 2019 at 2:18PM

Its more like 8%pa compound which does not sound too bad.
Obviously the £5,700 has not all been invested for 10yrs only the 1st £50 has been invested for 10yrs and £5,700 only for 1 month.

pkpk · 24 October 2019 at 2:29PM

Thank you all. I hadn't considered that the interest wouldn't be on the full amount as it wasn't actually there for the ten years. It seems obvious now.

Can I ask, how can you calculate to get the 8 per cent?

Also if I would have put the same into a FTSE tracker or Vanguard Lifestrategy is there a way of working out how the return would have been different?

Linton · 24 October 2019 at 2:37PM

Your return figure is misleading because you are drip feeding. Although your ISA has been running for 10 years half your contributions have been earning a return for less than 5 years. Better to think in terms of annual return which I calculate comes out to be 8.5%/year, assuming that, from your £50/month and a total of £5700, there was an elapsed time of 9.5 years. 8.5%/year is 117% over 9.5 years.

Clearly its a lot better than a cash ISA. However we dont know what your your fund was. If it was a global, 100% shares, fund then 117% over 9.5 years is mediocre. If it was purely UK, 100% shares, it was pretty average. On the other hand it could have been more cautious, in which case 117% may be rather high. If you let us know the funds name we can say something more specific.

MK62 · 24 October 2019 at 2:39PM

Well, the regular saver calculator on this site says it's around 6.67%.......that is, saving £50pm for 10 years and ending up with £8451.

As we have no idea what it's been invested in, we can only really say it's much better than a cash ISA would have been over the same 10 years.......

Depending on the investments in your ISA, it could have been worth more or less, but that's irrelevant now - it's currently worth what it it's worth, end of.
We have no idea what risk was taken to generate that return though, so whether it's good or bad, relatively speaking, we can't say.

Look on the bright side though.....looks like you avoided Woodford funds in your ISA.....

PS, by way of comparison, the Trustnet AFI representive "index" funds, over the last 10 years, have returned

Cautious - 5.6%pa
Balanced - 6.6%pa
Aggressive - 7.6%pa
FTSE100 - 7.3%pa
FTSE AllShare - 7.9%pa
FTSE All World ex-UK - 11% pa
FTSE Europe - 6.8%

So it's pretty average tbh, not bad, not great........

pkpk · 24 October 2019 at 2:39PM

Thanks Linton it was the Natwest Balanced Growth Fund that merged with the Managed Growth Fund earlier this year.

Linton · 24 October 2019 at 2:54PM

pkpk wrote: »

Thank you all. I hadn't considered that the interest wouldn't be on the full amount as it wasn't actually there for the ten years. It seems obvious now.

Can I ask, how can you calculate to get the 8 per cent?

Also if I would have put the same into a FTSE tracker or Vanguard Lifestrategy is there a way of working out how the return would have been different?

You need a spreadsheet to do the calculation, or possible a pension calculator....

Guess a % annual return r. That is equivalent to a monthly growth factor of (1+r/100)^(1/12). So each month you get the previous total and multiply it by (1+r/100)^(1/12) and then add on £50 to get a new total. Repeat for 114 months. Change r until you get £8451 as a final result.

Using a tracker

FTSE World tracker: £10K
FTSE100 Tracker:£8103
FTSE AllShare Tracker:£8332

Cant tell what the Vaguard funds would have done, they have only been around for about 6 years. VLS100 would probably have underperformed the FTSEWorld tracker but only by a relatively small amount. Not as bad as a FTSE tracker.

pkpk · 24 October 2019 at 2:59PM

Appreciate that. I found a compound interest calculator that works as well.

Interestingly it seems dispute banks having a bad name for funds (as I understand it) I seem to have managed to not shoot myself in the foot.

Through luck rather than judgement.

pkpk · 24 October 2019 at 3:03PM

Thanks for that. That helps a lot!

Maths and investments

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