Standard Life: the decisions that every investor must make

Will you nurture your shares or sell up after the float? And, as a deadline looms, should you buy any more?

Nobody should really whinge about a windfall.

Barring a last-minute bid from a rival, the insurer Standard Life will, a week from tomorrow, become the latest UK mutual to shed its status and float on the stock market.

At the same time, 2.4 million Standard Life policyholders will benefit from a windfall of shares worth, on average, an expected £1,540. But should they keep or sell them?

A number of Independent on Sunday Money readers have contacted us, asking whether it's a good idea to keep the shares and also benefit from a further deal that would give them one free share for every 20 they still hold 12 months after the flotation.

The decision isn't being made any easier by another deadline now looming for Standard Life investors. This applies to all customers who have investments and health policies with the insurer (not just those holding with-profits policies making them eligible for the windfall shares).

Standard Life is offering the chance to buy between £1,000 and £50,000 worth of extra shares at a 5 per cent discount to the final float price, to be announced this Friday - again, there's one free share for every 20 held for a year. To qualify, they need to tell the insurer they want to buy the discounted shares by 10am on Wednesday of this week.

So far, the anticipated price range for the first day of trading on 10 July is between 210p and 270p.

The two questions of whether to retain and whether to buy further Standard Life shares have prompted many of its customers to contact their financial advisers.

"We've had plenty of calls from clients," says Philippa Gee of independent financial adviser (IFA) Torquil Clark, "but the answer is really all about your individual circumstances and outlook."

However, when it comes to buying discounted shares, she and other major IFAs - including Anna Bowes of Chase de Vere and Justin Modray of Bestinvest - are in agreement: unless you're a sophisticated investor, interested in and following the financial services sector of the stock market, it probably won't be worth it.

To invest in one company is riskier than spreading your money across a number of companies in a unit trust fund. And if you're buying shares now, you really need to have an idea of what you're buying them for and when you want to sell them - either in the long term or for a quick profit.

"In particular, if you haven't had shares before, ask yourself why you would buy extra [just because it's] at a 5 per cent discount," says Ms Bowes. The shares may cost less than those offered on the open market, but their price could fall after the float, wiping out your 5 per cent "bonus". As with any shares you buy, the best advice is not to rush in.

Similarly, the decision on whether to hold or sell your shares requires careful thought. It will depend on your personal circumstances and financial goals, on what other investments you hold, and on your savings (outside of a pension) and debts.

If you owe £10,000, say, it will probably be a good idea to cash in the shares and pay it off. But if you already have a budding portfolio - with a mix of equities, bonds, unit trust funds, cash savings and property - then keeping the shares could be a good option.

"Deciding what to do should depend on whether you're positive about Standard Life in the insurance sector," says Mr Modray. It has sound prospects, he believes, with a healthy investment-fund arm and personal pension business.

The float is likely to catapult Standard Life into the FTSE 100 index of Britain's biggest blue-chip companies. This will mean it is automatically included in UK "tracker" funds, forcing fund managers to buy it and - at some stage at least - probably pushing its share price up.

It's also worth noting that the shares have an expected dividend of between 4 and 5 per cent, according to brokers.

Any bid for the insurer from a UK or overseas rival could also raise the share price. In April, Standard Life revealed it had received approaches, including one from Resolution, a company that consolidates investment funds. This was rejected in favour of the planned float but a successful listing on the London Stock Exchange could attract further attention, so raising the share price.

'I'll hold - and hope for a takeover bid'

Frances Todd, 47, from Hampshire, plans to hold on to her 800-share windfall, which stems from an underperforming endowment policy.

Ms Todd likes equities as an investment and thinks Standard Life may be a good bet. "Its [business performance] has picked up over the past couple of years and done rather well," she says. "The [expected] dividend of 4 per cent is the same as I'd get on a deposit account.

"Hopefully, there will be some growth in the share price too. And if there were a takeover, there could be a share price rise with that."