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  • FIRST POST
    • Murmansk
    • By Murmansk 8th Jan 18, 7:14 PM
    • 59Posts
    • 16Thanks
    Murmansk
    Vanguard Lifestrategy - should I cash in my "gain"?
    • #1
    • 8th Jan 18, 7:14 PM
    Vanguard Lifestrategy - should I cash in my "gain"? 8th Jan 18 at 7:14 PM
    I'm relatively new to investing but I've done a lot of background reading and I have a question.
    I have had enough money in Vanguard Lifestrategy since October to have seen it go up in value by about £4,000.
    It's been suggested to me that I should withdraw £4,000 in cash in case the market drops so that at least I'll not have lost that gain.
    I'm aware that the advice generally is to keep your cash in for years on end, not keep looking at the value of it, benefit from compound interest, etc but I can see the logic of this suggestion and I wonder what people think?
Page 1
    • A_T
    • By A_T 8th Jan 18, 7:25 PM
    • 279 Posts
    • 163 Thanks
    A_T
    • #2
    • 8th Jan 18, 7:25 PM
    • #2
    • 8th Jan 18, 7:25 PM
    How do you think you'd feel if in a few months' time markets fall and it drops £4K in value?
    • Murmansk
    • By Murmansk 8th Jan 18, 7:32 PM
    • 59 Posts
    • 16 Thanks
    Murmansk
    • #3
    • 8th Jan 18, 7:32 PM
    • #3
    • 8th Jan 18, 7:32 PM
    >>How do you think you'd feel if in a few months' time markets fall and it drops £4K in value?<<

    I'd think it would have been good if I'd taken out the £4K BUT as I am committed to long term investing I'd think that in due course (possibly a number of years) my investment would grow and the growth would be bigger than if I'd taken out that £4K
    • Prism
    • By Prism 8th Jan 18, 7:47 PM
    • 125 Posts
    • 86 Thanks
    Prism
    • #4
    • 8th Jan 18, 7:47 PM
    • #4
    • 8th Jan 18, 7:47 PM
    In a number of years, should you keep it invested it could be going up or down by 4K (or more) on a daily basis - a nice problem to have
    • smoulder
    • By smoulder 8th Jan 18, 7:52 PM
    • 25 Posts
    • 11 Thanks
    smoulder
    • #5
    • 8th Jan 18, 7:52 PM
    • #5
    • 8th Jan 18, 7:52 PM
    Markets are going to drop at some point but no one knows when. A rule of thumb is that you should be "comfortable" with seeing a drop in value equal to half of the equity portion of your portfolio.

    Consider your portfolio as a whole and try to imagine how such a loss would make you feel. If that's going to stop you sleeping at night, then dial back the equity proportion of your portfolio (the Lifestrategy series of funds offer several bond/equity splits - not sure which one you have right now but I'm guessing it's largely equity).
    • eskbanker
    • By eskbanker 8th Jan 18, 7:59 PM
    • 6,064 Posts
    • 6,079 Thanks
    eskbanker
    • #6
    • 8th Jan 18, 7:59 PM
    • #6
    • 8th Jan 18, 7:59 PM
    I'm aware that the advice generally is to keep your cash in for years on end, not keep looking at the value of it, benefit from compound interest, etc but I can see the logic of this suggestion and I wonder what people think?
    Originally posted by Murmansk
    I think it's worth ignoring anyone who offers advice about investments that includes any reference to 'interest'!

    If you withdrew £4K, what would you do with it that seems better than leaving it to grow as per when you originally decided to adopt a long-term investment strategy?
    • BLB53
    • By BLB53 8th Jan 18, 8:04 PM
    • 1,194 Posts
    • 974 Thanks
    BLB53
    • #7
    • 8th Jan 18, 8:04 PM
    • #7
    • 8th Jan 18, 8:04 PM
    Then again it could grow by another £4K over the coming few months..nobody knows so best advice would be to just forget about timing and just leave everything as it is.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • Broken Biscuits
    • By Broken Biscuits 8th Jan 18, 9:25 PM
    • 338 Posts
    • 649 Thanks
    Broken Biscuits
    • #8
    • 8th Jan 18, 9:25 PM
    • #8
    • 8th Jan 18, 9:25 PM
    Stay the course. Over many years you will likely be better off.

    But If I’ve read this right, you have made about 4K in 3 months and name a fund that has made about 4% over that period. So 100k invested as a lump sum.

    If my understanding is correct then that’s too big an amount to be in an ISA. If you havnt filled your ISA contribution this tax year, then move some across now to a similar investment in a tax efficient wrapper. Then in April do the same with another chunk. No point paying unnecessary tax when you do finally decide to cash in.
    • newatc
    • By newatc 8th Jan 18, 9:41 PM
    • 146 Posts
    • 159 Thanks
    newatc
    • #9
    • 8th Jan 18, 9:41 PM
    • #9
    • 8th Jan 18, 9:41 PM
    Tricky problem all investors have. Don't know where the stock market is going to go but I think it is reasonable to say that over the short term (say 18 mths) the potential downside is much greater than the potential upside and if I was looking at that sort of time frame I would be inclined to sell up to lock in the gains.

    But over the longer term who knows what's best (we'd be millionaires if we did). I think you have to go what you are most comfortable with.
    • dunstonh
    • By dunstonh 8th Jan 18, 11:20 PM
    • 90,375 Posts
    • 57,163 Thanks
    dunstonh
    Trying to time the market usually ends up in lower returns over the long run.

    you dont know when the next drop is going to happen
    you dont know how big the drop will be
    you dont know when the bottom will be hit
    you wont know when the real recovery comes (so when to go back in)

    Most people are better punching through it and coming out the other side without making withdrawals. That said, adding to it after a drop is often a very good idea. A lot of people will pile more in during a loss period.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • sixpence.
    • By sixpence. 8th Jan 18, 11:40 PM
    • 59 Posts
    • 16 Thanks
    sixpence.
    It depends how long you want to invest the money for? Are you in it for the next 10-20 years? If so no way take it out. No way mannnn. If you had a VLS just before the stock market crash you still would have made money now if you had stayed in. Just keep some money on the side so you can keep investing if there is a crash, that way when you back up you will have rocket power You feel so silly if the market goes up again this year and next year. For all we know there might not be a crash for ten more years.
    • Eco Miser
    • By Eco Miser 9th Jan 18, 2:39 AM
    • 3,320 Posts
    • 3,083 Thanks
    Eco Miser
    It's been suggested to me that I should withdraw £4,000 in cash in case the market drops so that at least I'll not have lost that gain.
    Originally posted by Murmansk
    That's dodgy maths.
    Assume you started with 100k, fund went up by 4% giving 4k profit, then fund went down by 3.846%, giving 4k loss, leaving you with exactly the 100k you started with.
    Or you started with 100k, fund went up by 4% giving 4k profit, you took the profit, then fund went down by 3.846%, giving 3846 loss, leaving you with 96154 in the fund, plus the 4000 you withdrew = 100154, 154 more than you started with.
    So withdrawing 4k preserves 154, not the whole 4000.
    Meanwhile, what happened with that 4k cash?
    Last edited by Eco Miser; 09-01-2018 at 2:42 AM.
    Eco Miser
    Saving money for well over half a century
    • ColdIron
    • By ColdIron 9th Jan 18, 9:27 AM
    • 3,737 Posts
    • 4,565 Thanks
    ColdIron
    You say you are "committed to long term investing" and yet after only eleven weeks or so you are thinking of cashing in your gain

    Can you see the obvious problem here?
    • Murmansk
    • By Murmansk 9th Jan 18, 10:28 AM
    • 59 Posts
    • 16 Thanks
    Murmansk
    That's dodgy maths.
    Assume you started with 100k, fund went up by 4% giving 4k profit, then fund went down by 3.846%, giving 4k loss, leaving you with exactly the 100k you started with.
    Or you started with 100k, fund went up by 4% giving 4k profit, you took the profit, then fund went down by 3.846%, giving 3846 loss, leaving you with 96154 in the fund, plus the 4000 you withdrew = 100154, 154 more than you started with.
    So withdrawing 4k preserves 154, not the whole 4000.
    Meanwhile, what happened with that 4k cash?
    Originally posted by Eco Miser
    Thanks for those replies, and particularly the one above which does a good job of explaining precisely why cashing in £4K is not worth doing.
    • Murmansk
    • By Murmansk 9th Jan 18, 10:33 AM
    • 59 Posts
    • 16 Thanks
    Murmansk
    You say you are "committed to long term investing" and yet after only eleven weeks or so you are thinking of cashing in your gain

    Can you see the obvious problem here?
    Originally posted by ColdIron
    I was not particularly thinking of cashing in my gain but seeking a reasoned argument for for NOT doing so as I couldn't think of a counter argument to the suggestion that had been put to me but the cold maths in Eco Miser's calculation is very helpful.
    • Murmansk
    • By Murmansk 9th Jan 18, 10:36 AM
    • 59 Posts
    • 16 Thanks
    Murmansk
    I think it's worth ignoring anyone who offers advice about investments that includes any reference to 'interest'!

    If you withdrew £4K, what would you do with it that seems better than leaving it to grow as per when you originally decided to adopt a long-term investment strategy?
    Originally posted by eskbanker
    I appreciate the word "interest" was not well chosen but the word "compounding" was what I was talking about - maybe I should have said "compounding of gains"
    • seacaitch
    • By seacaitch 9th Jan 18, 12:21 PM
    • 72 Posts
    • 133 Thanks
    seacaitch
    I'm relatively new to investing but I've done a lot of background reading
    Originally posted by Murmansk
    - If you bought your VLS in October as a "4 month gamble", then congratulations on your good luck - you've won 4 grand! Nice punt, what will you blow your winnings on? Be sure to enjoy them as gambling is a negative-sum gain for the punters...

    - If instead you bought your VLS holding as an investment with an intended time horizon of 20, 30, 40, etc years, then the answer to your "cash it in" question is very different.


    So why exactly did you buy your VLS?
    ie. what's your strategy?


    It's been suggested to me
    Originally posted by Murmansk
    Tell us more about this person - is this someone experienced in gambling or someone experienced in personal financial planning and long term investment strategies? Or something else?
    • Fatbritabroad
    • By Fatbritabroad 9th Jan 18, 12:47 PM
    • 224 Posts
    • 106 Thanks
    Fatbritabroad
    >>How do you think you'd feel if in a few months' time markets fall and it drops £4K in value?<<

    I'd think it would have been good if I'd taken out the £4K BUT as I am committed to long term investing I'd think that in due course (possibly a number of years) my investment would grow and the growth would be bigger than if I'd taken out that £4K
    Originally posted by Murmansk
    I'll post this again. my lightbulb moment on this (and yes I feel like a right idiot that it has taken me until 34 to realise this) is think of your s and s isa exactly the same as your pension. Assuming you pay into a workplace pension you probably dont even look at this year to year and whether it goes up or down you don't cash it out everytime the market drops. So why would you do anything different with your s and s isa
    • Fatbritabroad
    • By Fatbritabroad 9th Jan 18, 12:52 PM
    • 224 Posts
    • 106 Thanks
    Fatbritabroad
    Especially as I work for a financial service company
    • bostonerimus
    • By bostonerimus 9th Jan 18, 1:53 PM
    • 1,408 Posts
    • 822 Thanks
    bostonerimus
    NO!!! You need to leave your 4k gain invested to compound. Trying to time the market is not a good strategy for the vast majority of people and you will become frustrated and probably lose lots of money. It's the classic mistake.

    Your VLS fund (you never said which one) will have already cashed in your gains and used them to buy other shares to keep it's stated allocation stable. You should reassess your goals and tolerance for risk if you are uncertain or worried what to do with a 4k gain after such a short time.
    Last edited by bostonerimus; 09-01-2018 at 1:55 PM.
    Misanthrope in search of similar for mutual loathing
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