This week, I’ve been watching with interest as the value of my LISA plummeted.
It’s a portfolio of funds I’ve picked myself as a bit of an experiment as I wanted to see just how it would perform against a fully (and professionally) managed fund.
A bit of a disclaimer here: the amount I put in is a relatively small percentage of my overall wealth, and given that it’s a LISA that I’ll be unlikely to touch until I’m 60, there’s plenty of time to rectify any mistakes if things go wrong.
Obviously, don’t do this without understanding the risks involved and what you might stand to lose.
Case in point, I was feeling rather pleased with myself when a couple of weeks in, my portfolio had grown by around £100.
This was promising, given that the fees on Hargreaves Lansdown* (HL), the platform I chose for my LISA, was much lower than Nutmeg, where I held my main ISA (0.45% vs 0.75%).
HL is actually not the cheapest platform out there but I chose it because it was free to deal funds – what I was going to use the platform for – and it had an app and a decent web interface that didn’t feel like it was built in the early 90s.
You might think 0.35% isn’t much but it all adds up over time. And, if I can match the same level of growth using index funds, why pay the extra 0.35%?
Well, on Monday this week, the value of every single fund I was holding dipped.
It was just a little bit at first, so it’s not noticeable against individual funds. But across the board it added up to something like £20.
By Wednesday, things were looking like they were in free fall. Not only had I lost any gains I made in the preceding weeks, my portfolio was now worth less than what I had put in.
Awkward.
To be fair, the value of my Nutmeg portfolio also fell by a couple of percentage points so things were bad across the board.
I wanted to share this snippet from my week for a couple of very important reasons, the first being that when it comes to investing, there are no certainties.
You might get back less than what you put in like me, and past performance isn’t necessarily an indicator of future returns.
The second point is that you should always diversify your portfolio, whether it’s choosing the funds to invest in or deciding where to put your money.
And of course, if you do go down the investing route, make sure you have a solid emergency fund in a safe place so you don’t have to dip into your investments when the markets dip.
Incidentally, this week has ended on a bit of a high.
My money is still with HL – I didn’t have to withdraw it at the perfectly wrong time – and the value of my LISA has swung back up into the black. I even got some of my gains back.
But at some opportune moment in the future, I should probably diversify my portfolio of funds a bit more.
