What can I do about failing funds?

By THIS IS MONEY
Updated:

 

In 2005 we invested £30,000 in Scottish Widows Flexible Option Bonds and £30,000 in Friends Provident Investment Portfolio Bonds for a minimum five-year term which we understood to be low /medium risk.

calculator and money

Investing: Should we sit it out or reinvest?

Their combined current value is now only £49,000 and decreasing.

Should we pull out what is left and reinvest elsewhere or sit it out until the five-year term is up? M.B., Folkstone, Kent

Danny Cox, head of financial planning strategy at independent financial adviser Hargreaves Lansdown, replies: You are right to review your investments and consider whether they are in the best position to benefit from the recovery, when it happens.

Both of these investments have a wide range of fund options, so it is important that these are chosen correctly.

The adviser who sold you these bonds should help you with this and there should be no charge for switching funds.

If you surrender before the end of their fifth anniversary the chances are that you will pay an exit penalty.

Ideally, you should be invested in Isas not investment bonds as Isas are more tax efficient.

If you already use your Isa allowance then unit trusts are still, for most people, more tax efficient than investment bonds. More tax efficient means a better longer-term performance.

In my view you should check you are invested in good funds, then consider switching to Isas and unit trusts in 2010.

Be careful if these are with-profits investments as there may be a market value reduction on exit (this is another penalty) and of course there is no guarantee that a new fund will perform better than the current selections.

Reader offer: free brochures

null

funds

Most watched Money videos