Should I ditch this poorly performing fund?

8 September 2009

"I put an original 
investment of £50,000 into an Aviva balanced fund held by Barclays 
Investments approximately two years ago. However, it’s now half of its original value. Barclays has said the investment should start 
improving in the second half of this year, but I am still worried about it."

Ask the Professionals: Matt Pitcher, a wealth adviser at Towry Law, says:

It is difficult to identify exactly which fund this is from the details in your letter, and it’s certainly hard to find any funds that have fallen this hard in 
the last two years.

You first need to 
understand why this fund has lost so much money in such a short space of time. I recommend that you ask 
Barclays why the fund has fallen so much further than the UK stock
market and try to find out what it 
invests in. As a comparison, the FTSE 100 dropped 28% in 2008, but was positive in 2007.

It’s possible that you’ve been sold an investment that invests much more aggressively than you’re happy with.

The key to successful investing is to diversify your portfolio across all of the major asset classes, as this should protect you against extremes of volatility.

You may feel that it is too risky to move away from equities when you’ve already lost so much.

But what if the markets fall further  – can you stomach further losses of this magnitude?

Although Barclays seems to be telling you to hold on because the markets will recover in the second half of 2009, the reality is that, like everyone else, it just doesn’t know for certain.

It’s likely that you should remain invested, so you should look at your whole portfolio, including this part, and decide on a better asset allocation – one that fits with your tolerance to loss and appetite for risk.


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