What to do if your stocks and shares ISA is losing money
Investing in a stocks and shares ISA can be a good way to grow your wealth over time, but seeing your account value drop can be unsettling.
Factors such as market volatility can affect the value of your Stocks and Shares Flexible ISA. If you see your ISA is losing money, don’t worry; you’re not alone. Market fluctuations are perfectly normal.
In this article, we explore why your stocks and shares ISA might be losing money, and what options are available if you find yourself in this situation.
Why is my stocks and shares ISA losing money?
While stocks and shares ISAs can offer the potential for higher returns than cash ISAs, they come with risks that can cause your account value to fall. Losses only become permanent though if you sell your investments for less than you paid for them. Here are the most common reasons a stocks and shares ISA loses value:
Market volatility
The stock market is unpredictable. Prices of shares, funds, and other assets can fall due to economic events, political instability, interest rate changes, or company-specific issues.
Fund and asset selection
Not all funds or shares deliver strong returns. Choosing investments without proper research, relying solely on past performance, or concentrating too heavily on a specific type of asset, sector, or region can increase the risk of losses.
Find out more about the performance of the Unity Mutual Equity Fund, which our Stocks and Shares Flexible ISA invests in.
Fees
Charges associated with stocks and shares ISAs can also impact returns.
| Fee type | What it covers |
| Platform fees | An annual fee charged by your ISA provider for administering and providing access to your account. This could be calculated as a percentage of your portfolio value, or as a fixed fee. |
| Fund management charges | An annual charged deducted by the fund manager for managing the investments within the fund. |
| Trading fees | Fixed charges incurred each time you buy or sell shares or other investments; frequent trading can increase these costs. |
Note: It's worth carefully considering fee structures when choosing a provider or individual funds. Our managed Stocks and Shares Flexible ISA is fully transparent, with no platform or trading fees. There is a 1% management charge which is reflected directly in the fund's value, rather than being deducted from your account.
Economic and interest rate factors
The value of a stocks and shares ISA can fall when financial markets perform poorly. Economic events, changes in interest rates, inflation, geopolitical uncertainty and investor behaviour can all affect the value of the investments held within your ISA.
Higher interest rates can make some investments, particularly shares, less attractive. If borrowing becomes more expensive, and savings accounts or bonds offer higher returns, some investors may choose to move their money away from shares, which can cause share prices to fall.
Inflation can also affect investment returns. While inflation does not directly cause your ISA's value to fall, it can reduce the purchasing power of any gains you make. For example, if your investment grows by 5% over a year but inflation is 3%, your real return is closer to 2%.
Find out more about Unity Mutual's fund prices and performance over the last 12 months.
Short-term investing risks
Stocks and shares ISAs are most effective as long-term investments. Selling during a short-term downturn can lock in losses that might otherwise have recovered. Holding for the long term may give your investments time to smooth out volatility and grow.
Mismatched risk profile
Your investment choices may no longer suit your goals or risk tolerance; what worked earlier in life can feel unsafe as you approach retirement or later life.
If you feel your current ISA provider or fund choice no longer suits your needs, our ISA transfer guide explains how you can move your ISA without losing its tax-free status. You may want to speak with an independent financial advisor before making a decision to change your ISA or investments. Visit unbiased.co.uk to find an independent financial adviser, any advice may come with a fee.
How to reduce the risk of losing money
While you cannot get rid of the risk of losing money on your stocks and shares ISA altogether, there are ways to help manage it:
Take a long-term approach
Holding investments over a longer period may give them time to recover from temporary declines; withdrawing too early can lock in losses rather than giving your investments the opportunity to grow.
Invest regularly through pound-cost averaging
Contributing a fixed amount at regular intervals means you buy more units when prices are low and fewer when prices are high, smoothing out market fluctuations over time.
Diversify your portfolio
Spread investments across different assets to reduce the impact of any single poor performer. Diversified funds can be an easier way to do this than picking individual stocks as they spread your investment out.
Review your risk profile
Make sure your investment choices still match your financial goals and risk tolerance, adjusting as your circumstances change.
Keep an eye on fees
Review what you're paying in platform, management, and trading fees; lower-cost options can make a difference over time.
Is my ISA really losing money?
Investment values naturally rise and fall over time, and these changes only become solidified as losses if you sell your investment when its worth less than what you originally paid.
Prices may fall further in the short term, but they also have the potential to recover and grow again. This is a normal part of long-term investing.
If your goal is long-term saving, short-term dips shouldn’t derail your plan. What matters most is how your investments perform over the full duration of your investment journey, not over days or months. If you are concerned, you may want to consider reviewing your investment strategy with an independent financial advisor, visit unbiased.co.uk to find independent advice.
What to consider before cashing in your stocks and shares ISA
Deciding whether to cash in your stocks and shares ISA is an important decision and should not be based solely on short-term market fluctuations.
Remember, you only lock in a loss when you withdraw your investments while their value is below what you’ve contributed.
Here are some things to consider before cashing in:
Your investment goals:
Consider why you invested in the ISA in the first place. If your savings are intended for future purchase or other long-term goals, short-term fluctuations shouldn’t be the sole decider in any decision you make.
Market timing risks:
Trying to “time the market” by selling during a downturn can mean missing out on potential recovery and long-term growth.
Investment horizon:
Stocks and shares ISAs are designed for growth over several years. By investing over the long-term, it helps smooth out market fluctuations and maximise the impact of compound interest.
If you do decide the time is right to access your funds, our guide to withdrawing money from a stocks and shares ISA walks you through the process step by step.
How to check my policy value:
- Visit the policy value page: Go to Unity Mutual's my policy value page.
- Enter your details: Provide the following information to request an up-to-date valuation
- First name
- Last name
- Date of birth
- Policy number
- Postcode
- View your policy value: After submitting your details, you'll receive an instant valuation of your ISA.
Please note that the current value may not reflect recent contributions for unit-linked products.
Need help with your stocks and shares ISA?
If your stocks and shares ISA has dropped in value, don’t panic. Short-term dips are completely normal. Making the decision to cash in your ISA should always be aligned with your personal financial goals and situations, not a reaction to temporary market movements. You can monitor your investments through tools like Unity Mutual’s My Policy Value page and track the long-term performance to help you make informed choices about whether to keep your funds invested or withdraw them.
If you have questions or need assistance with your ISA, Unity Mutual is here to help. You can visit our Help & Support page, call 0161 214 4650, or email us at insure@unitymutual.co.uk for further guidance.
Capital at risk. Terms and Conditions apply.
Frequently Asked Questions
In the short term it can be quite likely; markets move up and down all the time, so dips are normal.
Over the long term (5+ years) markets have historically trended upward despite drops along the way. However, there are no guarantees and past performance is not an indicator of future performance. The value of your investments can always go down as well as up.
It depends entirely on your financial goals, as investing in stocks and shares requires a long-term horizon (5 years or more) to ride out potential market volatility.
Attempting to predict short-term market peaks and troughs can prove risky. “Time in the market" can be safer option and more successful than trying to time the market.
There's no fixed answer; it depends on the size and cause of the downturn. Historically, major markets have recovered from most crashes within a few months to a few years. However, some downturns can take longer and there is always a risk they won't recover. This is why stocks and shares ISAs are recommended for longer time horizons; it gives your money the opportunity to ride out a slump.
It is important to recognise that past performance can't be used as a guarantee of future returns, and there is always a risk of getting back less than what you put in when investing.
Investments in UK ISAs are covered by the Financial Services Compensation Scheme (FSCS), which protects up to £120,000 per person, per authorised institution, if your ISA provider fails. As Unity Mutual’s Stocks and Shares Flexible ISAs include life assurance cover, it qualifies as an insurance plan, making it eligible for 100% FSCS protection.
FSCS protection doesn't cover market losses. In a stocks and shares ISA, the value of your investments can still fall due to normal market movements. Cash ISAs are lower-risk day-to-day, as the value doesn't fluctuate, but they can still lose real value over time if interest rates don't keep up with inflation.
So, your money is protected from provider failure, but not from market ups and downs if you're invested in stocks and shares.
Cash ISA: Low risk, tax-free interest, value doesn't fluctuate. Can be great for short-term savings, emergency funds, or money you can't afford to lose.
Stocks and shares ISA: Higher potential returns over the long term, but with real risk of loss, more appropriate for money you are comfortable putting away for the medium to long-term.
One isn’t necessarily better than the other, it depends on what your financial goals are and your current situation. Many people may choose to do a mixture of both to balance the potential risks of investment with the safety of a cash ISA.
Important
The content in this blog is intended for general informational and educational purposes only and should not be considered advice.
We do our best to provide accurate and up-to-date information, but please keep in mind that rules, regulations, and product terms can change over time.
Additionally, details may vary between different providers or products, so the information shared here may not apply in every situation.
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