When to sell Unit Trusts? HELP!

Grego_2

Hi

In July i invested around £28,000 in a variety of unit trust and OEICS.

Ive spread them around the world and also in different sectors and capitalisations.

Anyway, I'm now about 18 % up, which is near enough £5000 profit.

Am stuck now as to what to do - should i sell some / all and take the profit?
It wont cost me anything to sell the funds and only around 1 % or less to get back in them.

Ive not had any capital gains this year but may well have next year. By hanging on i can see me ending up with much less if things go pear shaped

I know that the investment is supposed to be for the medium to long term but to be honest i wasnt expecting to get 18 % growth in about 7 months...

Is it possible to sell everything and then buy them back straight away or is there some kind of rule regarding 30 days or something?

Cheers

blinko

do you have them in an isa ? although im the opposite i just bought mine the other day after loads of mis haps and it down already

but yeah sound like you have had some good investments there

Reaper

What you are refering to is called "Bed & Breakfasting", i.e. selling and rebuying to realise a capital gain and use your annual capital gains allowance (£8,200 for 2005) to avoid tax.

To make this harder the 30 day rule you refer to was introduced in 1998. You must wait 30 days before re-buying or it does not count.

Ways round this include swapping unit trusts with a spouse or just selling and buying a different unit trust.

The best option is to shift some of them into a stocks and shares ISA if you haven't used up your limits. Either £3k or £7k depending on whether you have a cash ISA, then another £3k or £7k as soon as the new tax year starts in April. Then you don't have to worry about any future growth.

Paul_Varjak

Reaper wrote:

Ways round this include swapping unit trusts with a spouse

Would you have to sell the unit trusts and get your spouse to buy them back, or can you avoid CGT by simply re-registering the unit trusts in the spouse's name?

MJSW

You would need to sell and for the spouse to buy them back if you want to acquire a higher base cost. If you just do a straight transfer, it is on a 'nil gain/nil loss' basis for Capital Gains Tax purposes. In other words, the wife's base cost would be what the husband paid for them, so you've not increased the cost by doing the transfer (although she could then sell them herself and use her annual exemption of course).

mutley74

Grego wrote:

Hi

In July i invested around £28,000 in a variety of unit trust and OEICS.

Ive spread them around the world and also in different sectors and capitalisations.

Anyway, I'm now about 18 % up, which is near enough £5000 profit.

Am stuck now as to what to do - should i sell some / all and take the profit?
It wont cost me anything to sell the funds and only around 1 % or less to get back in them.

Ive not had any capital gains this year but may well have next year. By hanging on i can see me ending up with much less if things go pear shaped
I know that the investment is supposed to be for the medium to long term but to be honest i wasnt expecting to get 18 % growth in about 7 months...
Is it possible to sell everything and then buy them back straight away or is there some kind of rule regarding 30 days or something?
Cheers

The joys of saving and buying equities!!
All depends on what you are saving for, how long you are prepared to invest for, when you need the money, and attitude to risk.
If you need that money very soon, i.e. you have no other cash savings, i would be inclined to bank some savings. If you dont need the money now, you could leave it all as is and see if the markets rises more over the rest of the year. If its a volatile OEIC/UT you could sell those witha good rise now, and buy again when the prices drop (which you may have to be patient). I have much invested in OEICS/UTs in ISAs but i am prepared to wait at least a few years, but i do occasionaly sell part o fmy holding sto bank some profits, especially as i have only been making profits in teh last 2 yrs after the past few years being very volatile.

Paul_Varjak

Reaper wrote:

The best option is to shift some of them into a stocks and shares ISA if you haven't used up your limits. Either £3k or £7k depending on whether you have a cash ISA, then another £3k or £7k as soon as the new tax year starts in April. Then you don't have to worry about any future growth.

But I think you have to sell them and buy them back to put them in an ISA. That means you may be paying commission a second time and if the stock rises in price between your sale and re-purchase you will have further losses!

dunstonh

But I think you have to sell them and buy them back to put them in an ISA. That means you may be paying commission a second time and if the stock rises in price between your sale and re-purchase you will have further losses!

Using a discount IFA will get round the charges issue. The gap between selling and buying is the main concern. That can work both ways though.

Reaper

Yes, all these techniques involve selling and re-buying, so they will all involve a loss in terms of bid/offer spread and charges. However using a discount broker we are talking about a few percentage points, compared to 20-40% capital gains tax (I'll ignore taper relief for now to keep things simple).

The only free option is something MSJW mentioned in passing. When you come to sell if you discover you will be hit by CGT and you are married then there is a sneaky trick you can do. You can gift the shares to your spouse. These are transfered at cost price, not market value. They can then sell them for you using up their capital gains allowance instead of yours. Note this only works with a spouse, not any other friend or relative.

Grego_2

Thanks for the advice..

ive decided to sell my top earners (up between 25-40%) and cash in that gain - altho i will reinvest the money - and will stick the £7000 in a MAXI ISA come April.

Cant quite get my head around whether i will lose out or not if i sell say £1300 (original cost £1000) and only reinvest £1000 back in that particular UT or if i should stick in all £1300 as then id have the same amount of units as the original purchase...

Any advantage in that?