Withdrawing when funds are high in Stocks and Shares ISAs

Vordel

Hi everyone,

We (my wife and I) opened up two Youinvest Stocks and Shares ISAs just before the end of the last financial year. We went for one in the Cautious and one in the balanced portfolio.

They're performing above our expectations - the balanced portfolio is up by £1600 based on the initial £15,240 investment. And the Cautious £800.

I wondered if was the 'done thing' to withdraw profit and put it into a more stable means of saving?

This isn't especially a Brexit inspired question, I was wondering about this months ago. I understand the conventional wisdom that investments are a long term thing. But the cautious side of me wonders if it's sensible to withdraw all the profit or to put some of it into the safer funds operating within the portfolio. I'm no expert at this by any means so would appreciate an opinion; even though I understand that there's not likely to be a definitive answer.

Thanks

richy999

Unless you need to withdraw the profit, i.e. for income, I would leave it to compound.

If you are simply worried about your investment going down, it doesn't make a lot of logical sense to me to put the profit somewhere 'safe', but continue to expose the principal investment to risk.

dunstonh

I wondered if was the 'done thing' to withdraw profit and put it into a more stable means of saving?

No. It is very much not the done thing.

The done thing is to look at the objective and the timescale of that objective and invest appropriately to meet that.

If you have an investment portfolio then you rebalance it and that takes care of profits being moved into loss areas and vice versa. However, a move to more cautious investments suggests your overall risk profile is not known and needs a bit more work.

. I understand the conventional wisdom that investments are a long term thing. But the cautious side of me wonders if it's sensible to withdraw all the profit or to put some of it into the safer funds operating within the portfolio. I'm no expert at this by any means so would appreciate an opinion; even though I understand that there's not likely to be a definitive answer.

In the long term, the more risk you take, the greater the returns will likely be. However, the greater the volatility will be. The exception being the two extremes of risk (the speculative investments which are highly volatile and the very low risk investments that give little or nothing more than cash and are barely worth the effort).

So, if you have a 10 or 20 year objective, taking the money out of investments to go into cash will almost certainly give you a lower value in the end. You will be removing investment risk but you will be replacing it with shortfall risk and inflation risk.

Vordel

Thanks to both of you, that was really helpful

TrustyOven

dunstonh wrote: »

If you have an investment portfolio then you rebalance it and that takes care of profits being moved into loss areas and vice versa.

Which is fine if you have negatively correllated assets.
Both my fund holdings are up. I'm not sure I want to rebalance the over-priced world equity fund into the over-priced gilt fund. (overpriced relative to before Brexit, but I know I shouldn't be price-anchring...)

I guess I could just keep things as they are given that the portfolio has veered very little away from the allocation. Or I could get a more risky fund and use that as a counterweight for use in rebalances?

I guess my tangental question is how do you rebalance when all the holdings are growing but still keep the same allocation? And should one even try to rebalance in that situation? Or is it necessary to have a negatively correllated component of a portfolio in order to handle this kind of situation?

In truth, I'm unlikely to do any selling at all, and will buy the same £'s worth in 19 days time as usual accoring to the set allocation.

LXdaddy

If all your funds are growing at the same rate and they were balanced before then they are still balanced. No action needed to rebalance.


£80 in A and £20 in B balanced 80%/20%
both increase by 10%
£88 in A and £22 in B proportions are still 80%/20%


Of course if all investments move in the same way by the same proportion then MAYBE not as diversified as you planned.