Releasing a profit

malcolmfowler

I recently withdrew my AVC's from Prudential and opened a SIPP with Hargraves Landsdown. In a few month I have achieved a 8.71% growth in the four stocks that I invested in. My question is, how should I protect the gain? Should I sell and re-invest or just sit on them and hope they increase further? If I sell, should I re-invest in the same stock?

For anyone interested, here is the stock.

BlackRock UK Income Accumulation Units: +6.07%

Invesco Perpetual Income Accumulation Units: +6.62%

Standard Life UK Equity High Income Fund Retail Accumulation Units: +9.72%

Standard Life UK Equity Income Unconstrained Accumulation: +12.38%

Thanks

jimjames

All these funds are in your SIPP?

I don't understand your line about selling and then buying them again. All gains inside the SIPP are tax free so there is no benefit and lots of negatives for selling and buying the same back again.

If you are investing in funds then really they should be bought and left not traded over a period of weeks or months. By all means rebalance but it seems a way to lose money by trading funds that are more long term buy & hold.

malcolmfowler

Thanks for the advice, I'm quite new to this as my AVC's have always been managed for me.

I was just thinking about how to cash in on the 8% gain before things change and it becomes a 8% loss. i.e what you occasionally hear on the news about 'profit taking' by traders.

puk999

As jimjames said, funds are generally for the longer term. Trying to time the market is extremely difficult. That said, do you have a cash account in your SIPP? If so you can sell your funds and the proceeds will appear in this cash account ready for you to reinvest after the funds have fallen 8%. This is how it would work with my provider (Fidelity). I don't know about HL, but their Where can I invest in a SIPP page has a tick against Cash so it must be possible.

puk999

Other considerations on selling and repurchasing these funds are the dealing costs. BlackRock UK Income is a unit trust. This means it has a different buy and a sell price making switching out and back in again inefficient (confusingly, the prices shown include the 5% initial charge which is discounted to 0% by HL). Even if the fund was single-priced (such as your Invesco Perpetual Income) there might also be inefficiencies with selling/repurchasing. Something called a dilution levy (which I don't yet understand).

The costs above would be negligible compared to an 8% drop however.

Prothet_of_Doom

If you look carefully on google finance, you can download the daily share price (into an excel file) going back 10 years for every share you might be interested.
What I've done with my SIPP is look at my target shares, and look at both the normal growth profile, and the average daily, weekly, monthly fluctuations, by plotting them on graphs.

One of the one's that I buy and sell in my SIPP, could be seen to fluctuate about 1% either way on a daily basis, but occassionally fluctuate up to 5% in a week, but over a year was growing at about 10%. So I started off, buying and selling it about once a month, taking 2 or 3 % profit each time. Then suddenly it doubled in 12 months, and luckily I'd just bought back my investment, just before.
It was at this point I realised that I knew nothing, and could equally have halfed the value of my stake.

gadgetmind

The traditional way of "protecting" gains is via rebalancing between different asset classes. Anything else is pretty much doomed to failure even in expert hands.

I'm not quite sure why you're holding four UK Income funds? Diversification across asset classes, territories and company cap sizes will give you much better long term performance with lower volatility.

Your choices are either to read up on these fundamental principles (which are neither hard to understand, nor difficult to apply, but are non-obvious) or to go for an all-in-one "portfolio" fund that handles this for you.

Linton

malcolmfowler wrote: »

I recently withdrew my AVC's from Prudential and opened a SIPP with Hargraves Landsdown. In a few month I have achieved a 8.71% growth in the four stocks that I invested in. My question is, how should I protect the gain? Should I sell and re-invest or just sit on them and hope they increase further? If I sell, should I re-invest in the same stock?

You are looking at things the wrong way in my view. From day to day (or even year to year) the values will go up and down. But you are in for the long term so these fluctuations mean nothing as you should be focused on the underlying trend. If the funds seem overall to be doing their job just leave them. What would happen if you succeeded in "protecting" your gain by selling your funds? The market could well carry on going up as it seems to be today so you will have lost out. And what do you do with your cash? Surely you wont keep your money in cash forever. Have you any knowledge that tells you anything else you chose to buy will do better?

As other people have said having all you funds in the same area is a mistake. You should be looking at diversification so that you arent dependent on any one area or type of investment. You can start to do this in one fund which invests globally. However, as Gadgetmind suggests, a portfolio fund where the manager ensures that the money is invested in a balanced way across a wide range of different areas could make a lot of sense for you.

malcolmfowler

Thanks for all your advice.

on the subject

'Your choices are either to read up on these fundamental principles (which are neither hard to understand, nor difficult to apply, but are non-obvious) '

Can you suggest a tutorial/website for a newbie?

gadgetmind

malcolmfowler wrote: »

Can you suggest a tutorial/website for a newbie?

Sure.

"Smarter Investing" by Tim Hale is a great book. Some feel that he stresses low fees rather too much, but the principles of diversification are explained well. After reading this book, you *will* see why you need to diversify.

Monevator.com is a great UK web site, with many great articles. Again, a passive (and thus low fee) bias, but lots of great reading no matter how you choose to invest.

A rather more plodding work is "The Intelligent Asset Allocator" by William Bernstein, but it's very valuable and readable, though the US angle and age of it may confound some people. I personally found that it made me realise that most of the new trickery and marketing is just old principles in gaudy new clothes.

If you prefer quicker/lighter reads then I'm sure others will have recommendations but I personally like to understand the deeper detail.