Sell UK funds to protect against election slump?

supersadie

I woke in the middle of the night remembering more than half of my ISAs are invested in a FTSE All Share tracker and wondering whether I am over exposed in the UK, given that the election is looming.

I've begun to shuffle it about. US and global tech mainly. UK is now around 40% of the total.

Anyone with professional experience in this field got a view about whether to continue in this vein and reduce still further or whether, with the FTSE so high, I should hang on now, given that I bought relatively cheaply and if I need to buy back in, the prices will be higher?

Linton

The market can cope with good or bad events as long as they are known in advance. The one thing the market hates is a surprise. Well, the election has been known about for most of the past 5 years and so it is already priced in. The market knows that lab and con are very close. So it wont be a surprise if either one of those wins. Prices could well rise after the election as one unknown is ticked off the list.

Of course if UKIP get a majority..........

jimjames

Are you aware that the FTSE100 companies get around 70% of their earnings from overseas?

There may be a minor effect from the election but I wouldn't see it as being long lasting and with the very high prices in the USA I wouldn't see moving money there as being a safe haven at the moment.

You're completely missing Europe and Far East so I'd look to include them in your portfolio as well but on the basis of having a balanced portfolio not from panicking about the election.

dunstonh

I woke in the middle of the night remembering more than half of my ISAs are invested in a FTSE All Share tracker and wondering whether I am over exposed in the UK, given that the election is looming.

The UK election is a known event. it is not an unknown. The outcome is unknown but the expectation is a coalition. The markets have already factored that in.

It is possible that the worst option could see a minor short term decline on the markets (Labour supported by SNP) whereas a Conservative led minority would have little difference (possible slight rise no more than daily movement due to relief). In reality, whatever the outcome, it will have little or no impact that requires you to move adjust your allocation to UK equity.

Chasing returns is usually futile and results in losses or lower returns.

supersadie

Thanks to all. Stupidly, I hadn't thought about the income from overseas to UK companies. Good point indeed. I have got some exposure to the Pacific ex Japan. But Europe is in such a meltdown I don't fancy chancing my arm there.

As for discounting already before the election - another good point. Thanks for putting my mind at ease, people! :beer:

Gadfium

I guess that it will also depend on your time horizon. After all, if you are investing for 20 years, then you are going to have at least 4 elections in there.

Ryan_Futuristics

Haphazardly increasing and decreasing your exposure (due to fear and predictions) is how most people lose money ... We've got cognitive biases which make us perceive risk and opportunity backwards as often as anything

Generally if you're expecting a bit of a dip, the best thing to do is plan to buy more on the dip ... You might not time it perfectly, but you've still brought your average price down

On the other hand, if you're sitting on lots of FTSE All Share profit, and you're too heavy UK, now could be a good time to rebalance - take some FTSE profit and use it to build positions in undervalued regions/sectors, and spread your risk ... So rebalancing is a conservative way to guard profits

If you really want to protect yourself from a potential landslide, you need a system you follow to tell you when to sell and when to buy again

Some people are dubious of this, but actually it's very simple ... Each month, on a certain day, you'd look at whether the FTSE's price was above the SMA 300 ... If it's above, you hold, if it's below you sell ... Google 'market timing SMA Faber' ... But be aware most investors make a complete mess of this kind of thing - not something everyone should do