How I Narrowly Escaped Being Stuck With A Woodford Fund

I have been watching the news this past week with interest; the sudden fall from grace that Neil Woodford has seemingly done. It started with investors pulling millions of pounds from his funds and ended, at this point, with any trading within his funds to be stopped, so that investors cannot even get their money out. In fact, if the news is to be believed, the cash might be trapped in there until at least Christmas.

 

And, when reading yet another article about it all, it suddenly occurred to me that until quite recently, I held some of my own investments in one of his funds.

 

Part of this is because I invest with Hargreaves Lansdown. The investment company where I have my stocks and shares ISA. And, they have a list of funds that they promote, called the Wealth 50, which are supposed to be some of the best funds to pick from. After all, there are hundreds to choose from so they do the work in narrowing it down for you.

 

The particular one I was invested in was the LF Woodford Equity Fund. It paid out dividends every quarter, and as a dividend investor, regular payments seemed very appealing! Like clockwork, every three months. Although I can’t remember whether or not this particular one was in the Wealth 50 that Hargreaves Lansdown recommend, the Woodford funds definitely feature in there, or did until very recently. So, basically a recommendation from the company I chose to have my investments with.

 

See also: Dividend Income

 

It was one of the first funds I invested in, after doing some research online and seeing how popular the Woodford funds appeared to be, plus the investment company I use was also promoting them. Add to that the dividend income and I was sold, literally.

 

However, this was as quite an inexperienced investor. I’m quite happy to admit that! We all have to learn somewhere and everyone makes mistakes when they first start out at something. Me included.

 

One day, I was looking at my overall investment portfolio, focusing on returns but also the fees involved. There are ongoing fees with funds; they charge a percentage depending on the fund. Some are lower than others. I noticed that the fees for the particular fund I was invested in were slightly higher than I would have liked. Again, something I now know more about and what to look for. I added up the amount of dividends received and then looked at the cost and decided to sell them late last year.

 

In hindsight, what an excellent decision. 

 

I did make a bit of money from selling them – not a lot – but a bit. That combined with the dividends received meant I had not lost anything. And because everything is held within my ISA, I didn’t pay any capital gains either.

 

But, following the news this week, I’m glad I got out. Now, the numbers I’m talking about are incredibly small, in comparison to the bigger investors. Very small. However, the thought that someone else has stopped me from accessing my very hard earned money because of a cash flow problem – which is essentially what the problem is at the moment as too many investors have taken too much money out all at the same time – would be frustrating. Especially since there would be nothing you could do about it! The very fund that I was invested in is the one that has been shut down.

 

So, I suppose this is a tale of warning and diversification when investing. When investing, there is nothing certain about your investments. They can go up or down, and indeed they do, daily. To have a lower risk portfolio, you need to be diversified. This means you need to have holdings in various things, across different sectors. Don’t put all of your eggs in one basket, so to speak.

 

I will continue to watch the news with interest; I wonder what the end result will be.

 

Have you got any investments with Woodford funds? Did you get out before this? 

 

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