Stocks and Shares ISA - am I missing something?

[Mushroo]

I understand compound interest, and I know that you don’t get ‘interest’ on a stocks and shares investment. However, how do cumulative returns work?

For example, if I login to my pension, I can see it’s gained £11k since I started paying in. Great, all good.

On the other hand, I’ve been investing £150pcm into a Vanguard life strategy fund since 2018, so five years.

It’s currently showing a loss of 3%, even though at one point it was up about 10%. Should I have ‘banked’ the gain when it was up? I.e. withdrawn it, or have I done the right thing leaving it alone?

The other thing I don’t understand is that the cumulative gains for the fund over the last 5 years are 10.73%. So why is mine minus 3%?

I know with investments they go up and down, but I’m just worried I’m doing it wrong!

Which VLS fund?
If it’s VLS 20 to 60, the bond heavy portion has dragged things down.
80 has performed better ( I have it) 100 better still.
The UK heavy weighting hasn’t helped much either.

@BorgQueen it’s the 40 one.

I don’t necessarily mind that it’s down (although obviously would prefer it to be up 😂) but I’m not missing anything? I’m doing it ‘right?’ it just hasn’t performed very well?

It’s fine. Bonds just had a once in a lifetime ‘episode’ and did the opposite of what they are meant to do, which is lower the volatility and provide protection against market falls.
If you are investing long term, 10+ years, you can afford to up your equities, . Mid term, then VLS 40 should be ok.
Under 5 years and I’d look at ‘safer’ investments like a Short Term Money Market fund, while interest rates remain high-ish they are paying around 5% with very low fees. I have the Royal London one.

First of all are you looking at Daily fluctions or Total fluctuations. Depending on when you started it is possible for the Vanguard Life Strategy Fund to have made a loss - so called ‘low risk’ funds are lower risk because they invest in companies that may pay dividends or are in stable not not particularly risky industries (risk = growth, the higher the risk the greater the reward). A company that pays dividends usually does so at the expense of it’s share price - eg HSBC share price usually goes down by roughly the amount (cent wise) as it’s dividend pay out on the day it’s announced / paid. Then it picks up again.

I think you might benefit from learning a bit more about how investments work. Hargreaves Lansdown has a great portal for new investors. Similarly a lot of the ivy leagues go through the basics on their free courses on Coursera.

You also need to consider whether investments are for you if you are going to be stressing over every downturn (it likely will get worse lol). You often aren’t in a position to know if a low risk investment has performed well before the 5 year mark. And even then I wouldn’t expect more than 3-4% growth each year.

The trick in a downturn is to add more to an investment (not pull out), so the best thing you can do is just keep up your regular saver.

As pp you might be seeing daily fluctuations on the table. There's another chart (on the vanguard portal) that shows you total return and when you invested. Which fund is it? My 40 and 60 are down over 3 years but the 80 is up (not enough)

Thanks all - it’s showing down 3% since the account opened.

I’m ok with it being down, I don’t plan to use the money anytime soon and I know there are fluctuations, I’m just trying to understand why I’m down 3% when Vanguard says the performance of the fund over the last five years is plus 10%.

Is it because I’ve been paying in monthly, so most of the money hasn’t actually been in there 5 years so more exposed to recent market conditions?

@Wenfy I’ll take a look at those resources, thank you, I need to properly get my head around it!

Annoyingly my husbands ISA is doing great 😂

Individual performance will vary from that of the fund based on when the money is invested. You are doing the right thing by saving regularly, or pound cost averaging as it is sometimes called. When prices fall you get more for your money. If you were to increase your contributions when the fund falls in value, you might find that your long term return exceeds that of the fund. You clearly don't intend to panic and sell in a downturn, so all good.

Another useful resource, with lots of good articles on compound interest and regular investing is the Monevator site.

3% is nothing.
I put £20k in a ‘safe’ Bond heavy fund a week before bonds tanked, it lost 20%. First time I’ever done a lump sum, I usually drip feed.
I left it a year, still 15% down so I bailed and bought another, riskier fund, I’ve got £700 to go until it’s recouped the loss.
Them’s the breaks.
I’ve sold a chunk of VLS 80 and split the money between a World tracker and a Short term money market instead.

A fund can be considered ‘on target’ if it’s within plus / minus 10% of the amount you paid in, so it’s a good idea to get into the specifics of what Vanguard is aiming for with this fund. Also fund performance is measured assuming the share price 5 years ago to the day AND assuming all dividends / returns (an example figure) are reinvested. It includes Vanguard fees but doesn’t include any charges your platform may make.

I no expert but I'd sell it and get 80!20 or 100 equity.

Or get other vanguard funds as well us weighted or end global

Mine is 100 equity and is currently 30% up

Hi, would you say the same applies with pensions - ie keep contributions high when it's a downturn - like this year.
That's what I've been doing - i understand investing beyond knowing a workplace pension is worth it so chucking money at it.
But am I buying more "units" in a down turn that will pick up later? I'm guessing the value of each unit is down so I'm buying more and so will see greater growth in a future decent market? Thanks