What to do when S&S ISA Fund investment is performing very well

bogginharry

Hi all,

I have had a S&S ISA open with Fidelity open for a while now and I have put £2500 into a few funds.

One of the funds, the HSBC American Index, is performing very well at the minute, up around 25%. £750 -> £942 = £192 profit.

I know it's not much money in the grand scheme of things but 25% seems like it won't last. What would be the best practice in this situation? Sell and reinvest or keep the money in there as the long-term investment I had planned originally?

bowlhead99

You have a few funds. Presumably the ratio of those funds was initially decided by some view of risk and goals and what the future might hold. Let's say the American fund was 30% (£750 of £2500).

But now the American fund is worth £942. Maybe some of the others have gone up a bit or a lot or perhaps gone down. Overall your pot is no longer £2500.

Let's say your pot has gone up to £2750.

If you still believe on a long term view that it is appropriate to have 30% of your funds in North American equities, which is what you thought going into this - and, nobody would say that's a terrible choice for an equities-heavy portfolio, because 40-50% of the world's stock market by value is in North America - then you should probably still have 30% of your funds in North American equities. Of the £2750 you should have £825.

However you have not got 30% and £825, you have got 34.3% and £942.

So on that logic you would sell about a hundred quid or so and put it into one of the other funds - the one(s) that have done less well than average.

Of course if North America is up to £942 while the whole thing has fallen to £2000, then you have 47% which is way more than you used to have, and you should sell a bigger slice. But if the total pot size has grown to £3150 then your £942 is still about 30% ish and is probably fine.

So, don't sell just because something went up a bit. Sell it because it went up a lot more than other things and started to be a bigger proportion of your overall portfolio than you really want it to be. Aim to make changes if the proportions have changed significantly or it has been a long time since you looked at it. Once a year is fine.


I also wrote a longer version the other day, post 21 of this https://forums.moneysavingexpert.com/discussion/comment/67872874#Comment_67872874

ChesterDog

In deciding what do do - if anything - I would recommend also looking beyond the stark figures.

Just as you will have done when choosing the fund, look at where and in what it is invested and consider where you feel those things are likely to be heading.

Of course, you cannot be certain, you might even be totally wrong, but you should bring it into your thinking at the very least.

Thinking that your 25% gain 'won't last' just because it's there is speculative-style rather than investment-style thinking.

bogginharry

That makes perfect sense, thank you. I'll have a closer look at the numbers.

Just FYI, I have put £500 each into in Fidelity Index World (up 14.5%) and an Emerging Markets tracker (no change yet), and £750 in FTSE All Share, up ~6%).