Sell at a loss now and buy new to make gains

nxdmsandkaskdjaqd

I have some underperforming funds (e.g Standard Life UK Equity High Income ) which has had average performance. Based on the actual time of purchase, some purchases of the fund are in a small profit, others are not.

I know you should buy low and sell high, but given the current cliamte, what is the best strategy.

Should I wait for the fund to return profit and sell, or, should I dump the fund and start making better gains from the new fund? Which is the best way?

srcandas

nxdmsandkaskdjaqd wrote: »

Should I wait for the fund to return profit

Today it is worth what it is worth. Ignore what you paid for it, what it has lost, what it has gained.

Once you rid your mind of the past you can make decisions based on fact and not emotion.

If you feel the current price (value of what you have) is low then you must believe there is the potential for gain. If you feel it is over priced / over valued then sell.

Beyond that there is opinion and your guess is as good as any.

Personally I feel that Europe is still deciding what the problem is and not yet got to the stage of what the solution might be. The chances of a rapid boost to confidence and profits is limited while the chance of further larger falls is very real. I'm still sitting it out.

And there is something I believe very important. The decision is not fund A or fund B. There is a third option; no fund at all (leave it gaining a little interest on deposit)

All that is my amateur opinion. If I could predict the future I'd be a billionaire. Just for the record I'm not.

Good luck :beer::beer:

gadgetmind

srcandas wrote: »

If I could predict the future I'd be a billionaire. Just for the record I'm not.

Q: How do you become a billionaire on the stock markets?
A: Start with two billion.

jamesd

There are several aspect to this.

First, you write about under-performance or average performance. Is that compared to other funds in the same sector or just because some purchases are up and some down? If it is compared to other funds in the same sector, look to see whether the fund consistently under-performs. If the answer is yes, switch to a fund that does not have a record of consistently under-performing.

If it is just the ups and downs then you need instead to consider your risk tolerance for your investments as a whole, not on a per-fund basis unless the fund is also under-performing its benchmark or sector. We aren't in particularly hard times so far as losses go at the moment so if your risk tolerance is exceeded that might require corrective action.

In general prices are reduced at present making a generally fairly good buying time but with a significant possibility of better buying times before recovery, meaning more possible drops in value. For all of us this is something of a gut check. Can we buy when there's bad news and prices have dropped, intellectually knowing that that means cheaper buying?

What I did was some selling before the recent elections and I'm still doing my regular and some additional buying using the proceeds of the sales. I currently have high cash weighting for my own risk tolerance and am looking to reduce it over time, trying to buy at depressed prices.

Glen_Clark

gadgetmind wrote: »

Q: How do you become a billionaire on the stock markets?
A: Start with two billion.

Or invest other people's money like the professionals do - so they make money whatever happens, whether their predictions were right or wrong.
I haven't heard of anyone who has made a fortune on the stock markets just by investing their own money?

gadgetmind

jamesd wrote: »

look to see whether the fund consistently under-performs. If the answer is yes, switch to a fund that does not have a record of consistently under-performing.

People tend to choose funds with a record of over-performing, only to have them then under-perform. Stick or twist? Tricky!

The funds twitch up, the funds plunge down, only those high fees remain constant.

If only there was an alternative ...

grey_gym_sock

gadgetmind wrote: »

If only there was an alternative ...

but wait, perhaps there is ...




gold?

jamesd

gadgetmind wrote: »

People tend to choose funds with a record of over-performing, only to have them then under-perform. Stick or twist? Tricky!

Beats sticking with a consistent under-performer, where even the studies I criticise do sometimes show persistence of under-performance.

gadgetmind wrote: »

If only there was an alternative ...

Regrettably that's difficult, since avoiding funds that consistently under-perform applies to passive funds, where it's due in part to higher charges, higher costs or flaws in tracking, as well as to active funds, where active management can also be added to the scope for under-performance.

Switching to direct holdings substitutes other costs, lots of expenditure of personal time and an investor who may be paying less attention, though it's one popular alternative to those who dislike fund charges but prefer to pay broker charges instead.

fiesta04

grey_gym_sock wrote: »

but wait, perhaps there is ...




gold?

I am still looking over my shoulder, looking out for......


Mr Investor to appear....

F4

gadgetmind

jamesd wrote: »

Beats sticking with a consistent under-performer

Define "consistent".

Regrettably that's difficult, since avoiding funds that consistently under-perform applies to passive funds, where it's due in part to higher charges, higher costs or flaws in tracking

All of these can be assessed using objective criteria and they will lead to consistent under-performance.

where active management can also be added to the scope for under-performance.

Not so easy to assess using objective criteria. (Understatement.)

it's one popular alternative to those who dislike fund charges but prefer to pay broker charges instead.

Broker charges can easily be kept down to tiny fractions of a percent. This isn't as easy with fund charges. (Another understatement!)

However, we're looking at a generic problem. When any asset goes down in value, be it a directly held equity, a market tracker, an Investment Trust, a fund, or even a precious metal, how do you decide whether to hold or not?

With the active investments, you need to somehow be able to differentiate between drops due to the individual market sectors, drops due to an unlucky streak and/or a risky (but justifiable) play not coming off, drops due to the manager's stock picking "hot hands" not now being quite so hot, and much more.

Those investors who really feel that they they are qualified to make such judgements need have no fear of active investments.

jamesd

It's potentially no harder to assess under-performance of an active or passive fund. Just compare to the sector, credible benchmark or both and observe the results. While active management adds another possible cause, in both cases the results are what matters. For active you then need to consider if it's some credible deliberate strategy that might work sometime later but that's unlikely unless there is some clear change, like in manager or economic cycle position.

If a fund has under-performed the sector for say ten years there'd better be some really good other reason for holding it, or it deserves to be dumped.