Financial lessons from Woodford woes
One of the biggest stories in the personal finance pages over recent weeks has been the revelation that investors in Neil Woodford’s Equity Income fund have been stopped from making withdrawals as he tries to shift the portfolio to more liquid assets.
It came after a flurry of investors withdrew money amid concerns about his performance.
Woodford built a reputation as a top stock picker during his time at Invesco Asset Management, building a decent track record and a following that accompanied him when he setup his own fund house in 2014.
His Equity Income fund has regularly been among the most popular on DIY investing platforms and there have been unfortunate stories of investors finding all their savings are now stuck while withdrawals are suspended.
It is a tough time for anyone unable to access their money and we hope the issues are resolved quickly and fairly.
But it does also underline the importance of diversification and not putting all your eggs in one basket.
Investing is a long term game, so there may be an argument for sticking with Woodford if you have the patience and belief that he will come good.
But whoever the manager is, sticking all your money in one fund is not the best approach.
A balanced portfolio that combines different regions, assets and sectors can work best as losses in one part can be made up by gains elsewhere.
Woodford was popular among DIY investors as he is a recognisable name, and in some cases was very widely promoted.
This can be attractive for those who are inexperienced investors or don’t have time to research the market.
An alternative method could be to outsource the research and trust an experienced financial adviser to help find and build a diversified investment portfolio that suits your needs.
An adviser can build and monitor a portfolio and even decide when it is time to sell out before it is too late.
- The value of an investment and any income from it can fall as well as rise and you may not get back the original amount invested.
- Past performance is not a reliable indicator of future performance and should not be relied upon.
