So how was that (financial) year for you?

bundly wrote: »

I'm very grateful that peeps are taking an interest in my welfare, and have read all you wrote, and am as ever grateful for advice if people can see me heading for disaster.

I acknowledge that I was just lucky and that next year I might only make 10% or even 5%. Even if I made 0%, that 17% would tide me over and would be 8.5% overall for the two years, wouldn't it? Anything is better than having it all in silly BS savings paying 1%.

You are right that gaining 17% one year and 0% the next is a similar overall return to getting 8% twice.

But the outcomes from the sort of investment funds that have delivered you 17% in a year are not just +17%, +10%, +5% and 0%. They also include -5%, -10%, -20%, -30%, -45%.

So, let's say your £100 has grown to £117 after a year: a 17% rise. What happens if the returns over the next year from your haphazard selection of funds is a 40% loss? The £117 less 40% of £117, leaves you with only £70.

So, over the two years your initial £100 would have gone down to being worth £70. So, overall you have lost 30% of what you started with. Instead of the two yearly numbers averaging out to gaining something like 8% a year, they would average out to losing something like 16% a year.

For someone like you, who does not like risk, hopefully you can see that getting a return that averages out to *negative* 16% a year for a two year period, might be considered a worse outcome to "having it all in silly BS savings paying 1%."

The only problem is, I really don't want to spend any time at all "Doing some more research on the funds you purchased and what sort of losses they could produce when markets are less favourable. Do some reading up on Investments generally through books and blogs."

I know I *ought* to, but honestly the whole thing bores me, the jargon makes my eyes glass over, and the figures swirl around in my head and make my little brain ache. I apologise profusely for being like this, but I just am.

You don't need to apologise to us for not wanting to take an interest in how you can use your money to safely make a return - it is not our money you are putting at risk, just your own. So it's only you that you need to apologise to, for that.

Generally in order to make money grow - or maintain its value against inflation - over the long term, you need to use investments rather than savings. The two options really are learn about investments, or consult an IFA, and let that independent financial advisor guide you through the options and settle on something sensible. Otherwise your pot of money is going to take a random walk up and down each year, and may end up in disaster.

You say you don't really need the money, and that you have come from humble beginnings, but that doesn't mean you wouldn't miss it when it's gone, and it could be quite emotionally damaging if you thought you had £150k+ of liquid assets at one point and you lost it by making poor choices.

If you instead bought advice from an IFA, your ISA and general investment account balances would still take a somewhat random walk each year (because nobody knows where the market will go from time to time) but its path would be rather more controlled and not experience such wild swings, and your lack of knowledge or interest would not be a hindrance because you would literally be paying someone to be knowledgable and take an interest on your behalf.

Back in the thread from November 2016 where you were considering getting professional help from an IFA, someone asked for a bit more detail about your circumstances including things like your attitude to risk. You said:

bundly wrote: »

• what your attitude to risk is hate risk

B.

That attitude is simply not consistent with doing what you have done, in exchanging all your cash savings balances for investment balances using investment funds chosen haphazardly. If you still have that attitude to risk, in my opinion you should change the way you are looking after the money.

You mentioned on your other thread that you had first invested in two p2p products that offered potential gains of something like 8% a year , in which you felt it was almost impossible to lose money. But then you thought that the returns from your funds with HL were doing better and would do better so you got rid of the investments in which you thought it was pretty much impossible to lose money, and put your cash into funds in which you hope to get double-digit annual returns.

One misconception is that the 8% return from the P2P was safe return - it's not, they only offer you that much to compensate you for the risk of not achieving that return and perhaps losing your capital. As the banks are paying 1% for a risk free return it's very unlikely that someone else would offer 8x that for a return with similar low risks. But moving beyond that... if it's really paying 8% and it's really safe, then moving to something with higher risks which happened to achieve 13-17% one year, is not a sensible move if you don't have much of an appetite for risk. Even if you have plenty of spare money. Because if you genuinely already have enough money to fulfil life's objectives, why take the risks?

One of the reasons people have shown concern in this thread is that you mentioned you had a safe 8% coming to you from the p2p and at the drop of a hat you dumped it to chase a better return from your equity funds investments. If you are going to change your investment plans on a whim, that can be quite damaging for your overall wealth.

For example, say you have £155k in equity funds and it drops by 35% next year to £100k. "Ah well", you say to yourself, "only a couple of years ago I only had £100k so I haven't really lost overall. and I understand that shares can go down as well as up, so I will keep at it and hopefully the funds will recover". But then the next year they fall another 20% and now you only have £80k... "Uh oh", you say to yourself, "I guess I was better in cash after all, I should stick to what I understand with the building society bad rates". So you sell all the funds, lock in a loss and put the £80k back in banks and building societies which seem like a better option because they are at least paying positive rates.

And then the stock markets go back up again after a couple of years but you are not on board because you were scared out of them. So your £155k became £80k. As you have frugal spending you are still solvent (at least until perhaps one day you need greater levels of later-life care) but some people would be devastated by losing seventy five thousand pounds in two years of holding some investments. People kill themselves over that sort of stuff.

But losses of 40-50% over a couple of years, are quite possible if you have just selected a portfolio of funds (of the volatile sort that can grow 17% in a year) somewhat at random and don't do any proper research because when you try to research it's a dry subject and you get bored.

The stocks I chose were (I think) all from the HL Wealth 150, which are funds that HL themselves have picked as not being
volatile or too risky.

That's a misconception. Yes the ones in the Wealth 150 are the ones they prefer to promote. In some cases because they are paid to do so, or have an agreement that their customers will get a management fee reduction if HL give a certain level of business to the fund manager. In other cases because they are popular funds that everyone talks about so they won't get criticised for recommending them even if they do terribly for a few years running.

That doesn't mean they have picked them because they carried out an objective assessment and decided they were not 'too risky'. Because they have hundreds of thousands of customers and don't know how much risk any of you can personally handle. They are not personalising the list to you. So don't make the mistake that a marketing list is a list of safe funds, nor that the different sectors offered are all useful or necessary. Many/most of them are specialist funds designed to be held as part of a broad balanced portfolio with other complementary funds (which an IFA could help you construct after discussing how much volatility you could really handle).

audaxer I can't give away all my secrets but here are two I chose myself: Legg Mason IF Japan Equity (gained 38% over the year) and Baillie Gifford Japanese Smaller Companies (16%).

The Legg Mason fund had a particularly high return last tax year. For the 'GBP hedged' version it delivered almost 58% for the year although the normal unhedged one was lower due to the exchange rates from yen to pound moving over the year.

You may well have bought it after seeing it a high performers list on the HL site or elsewhere but they are not currently actively promoting it. Here's a link to their old commentary written back in 2015, http://www.hl.co.uk/funds/research-and-news/fund-news--and--alerts/legg-mason-japan-equity-fund-research-update-2015-03-25 , in which they say: HL will often try to influence their customers to invest towards or away from particular funds, so you shouldn't let a good or bad write-up from them influence you too much - they are salesmen after all. But before you jump for joy that you picked it and it did well, thing you could do is look at how it performed in its less-good periods in previous years, to get a feel for what investing in a super-specialist volatile fund really means.

I know you have said that your eyes glaze over when trying to do research, so perhaps a visual tool will help. Below is the performance chart for a 4-year period from 16 Jan 2006 to 15 Jan 2010. The top line is the 'Personal Assets' investment trust, which has an objective of preserving and growing their investors' capital, in that order of priority. The middle line is the Investment Association average performance for Japan-focused funds that survived that time period. The bottom line is Legg Mason IF Japan Equity.


As you can see, during the 'global financial crisis' or 'credit crunch' the Personal Assets Trust was relatively unscathed and four years after the start of the graph it was up about 20%. The IA Japan sector generally dropped over 40% at the worst point - along with many other funds which invest all their money into international equities - though after 4 years had recovered to only be about 20% down.

Meanwhile your top tip Legg Mason IF Japan fund was down over 80% at one point - with £100 at the start dropping down to under £18... and after four years was only just back up to a 75% loss.

* footnote - in case of confusion, the figures in the table below the chart are of the most recent five 12-month periods, and you can see there's no 80% loss there, and it did better than the 'rival' comparisons I used. But of course, you shouldn't buy things just because of them going up the most in the good times. You don't know whether the next four years will be like the most recent four years (good times) or the four years with that nasty blue line dropping 80% and staying there a while (bad times).

audaxer I can't give away all my secrets

You are posting anonymously on a forum. You are investing into funds which have hundreds of millions of other peoples money in them. You *could* reveal your secrets and it wouldn't stop you being able to make or lose money in those funds. And people might be able to help you understand more about what you are invested in. But if you don't want to, that's fine.

Nice that Bowlhead reminded me that a year ago I had £100k. I now have £155k. Not too shabby for **** who has almost no idea what she's doing.

Yes, I had only mentioned the £100k because in the thread I linked above in November 2016 which is a year and five months ago, you mentioned having £100k to invest - but perhaps that was in addition to a fully invested ISA or two along with your pensions which you're now counting within the £155k.

If you had really got 13% a year on what your ex recommended and 17% on what you selected yourself, your average return would be somewhere between the two (say 15%), and you'd have turned £100k into £115k. The fact you now have £40k more than that, is because the £100k vs £155k is probably not a like-with-like comparison, if you were trying to imply by the 100 ---> 155k that you had done very well with your investing for someone who doesn't know much about what she's doing with investing.

Perhaps the other £40k is because the £100k at the start was a very conservative assumption, or the £155k at the end includes pension or other lump sums such as inheritance, a grand or so of SIPP tax relief, and the excess of your rental income from your lodgers and your benefit income over the modest expenses of running your life.

bundly wrote: »

BOWLHEAD

I hope you will meet me over on my new thread about what to do with another £220/m I shall start getting in the next few weeks. I don't have any use for it and am looking to invest it somewhere ....

Is it mandatory for you to get that tax free pension commencement lump sum and £220/m extra income starting from right now at age 60? Or is there an option to defer it and get a higher payout later? Such options can sometimes be quite lucrative, so investigate that first if you don't actually have a need for the money.

bundly wrote: »

Thanks very much everyone. I am really touched to find everyone concerned for my welfare. I really DON'T need my ex - I have all you lot!

You don't have all us lot if you are oversensitive to what you read on the forum and keep 'reporting' people for their views. The pool of people willing to offer their views and assistance for free will dwindle rapidly.

stephenadarglas wrote: »

................... on the other hand they may be jealous of you bundly.

When you've been an investor yourself for several decades. Then you'll have a broader appreciation of some of the responses that have been made. You cannot beat personal experience. The lows, the highs, the mistakes one makes. You'll never stop learning.