Do you 'top slice'?

ChopperST

Personally I like to re balance quarterly, with new money if I can as opposed to selling.

http://www.marketwatch.com/story/the-right-way-to-rebalance-your-portfolio-2014-02-18

AnotherJoe

ChopperST wrote: »

Personally I like to re balance quarterly, with new money if I can as opposed to selling.

http://www.marketwatch.com/story/the-right-way-to-rebalance-your-portfolio-2014-02-18

Very interesting article, thanks for that.

My dilemma as i start thinking about retirement is should i look at moving into high income investments, or growth investments and then sell them off as I need (and do i sell the stars or the dogs?). With 25+ years investing all with growth as the aim its hard to wean myself away from a growth strategy, when I buy a high income one and then just see it dawdling there doing nothing from one year to the next. Psychology I know.......

A bit like the "sell half" strategy mentioned earlier, I find myself with half income and half high growth (hopefully) investments. Some might call it a mishmash. More by luck than judgement quarterly would also tend to be my frequency in general.

Though that's tempered by dividend dates. I dont know if it really makes any difference but for example I've some investments i want to sell in order to buy some others, for rebalancing as it happens. I'd do it right now but the ex-div date on both is only a month away so i will hold. I know the received wisdom is that the stock will drop by the amount of the dividend the day after but its hard to turn down a guaranteed amount.

ChopperST

How long do you have to retirement? Why not just sell it all and split it between a world equity fund and a gilts / bond fund and adjust the % as you get closer to your retirement age?

Eco_Miser

AnotherJoe wrote: »

My dilemma as i start thinking about retirement is should i look at moving into high income investments, or growth investments and then sell them off as I need (and do i sell the stars or the dogs?).

If your investments are outside tax-exempt wrappers, selling gives rise to Capital Gains (£11100 annual allowance), dividends give rise to income tax (£5000 dividend allowance, and maybe some of your personal allowance). Ideally you'd want to fully utilise both allowances.

AnotherJoe wrote: »

Though that's tempered by dividend dates. I dont know if it really makes any difference but for example I've some investments i want to sell in order to buy some others, for rebalancing as it happens. I'd do it right now but the ex-div date on both is only a month away so i will hold. I know the received wisdom is that the stock will drop by the amount of the dividend the day after but its hard to turn down a guaranteed amount.

You'd get the dividend on one or the other either way.

planteria

Stu_N_ wrote: »

Would you sell all or some? Selling just some means those sneaky dealing charges rack up quicker...

agreed, and if i could take sentiment out - which is impossible, then i would definitely cut losers quicker and run winners harder..

AnotherJoe

ChopperST wrote: »

How long do you have to retirement? Why not just sell it all and split it between a world equity fund and a gilts / bond fund and adjust the % as you get closer to your retirement age?

In order;
One year.
Because I cant get out of the habit of 25 years of investing in growth funds and shares ! The best i can manage is to put some of it in those sorts of things but I have funds that have grown 30-40% over two to three years and its hard to sell them all to buy "boring dull 5% a year fund" when i might be giving up another 10-20%
Because retirement age isn't the benchmark it once was (in terms of lowering risk to total sum just before buying an annuity)

I'm not claiming any of this is that rational or sensible what I'd advise someone else to do

AnotherJoe

Eco_Miser wrote: »

If your investments are outside tax-exempt wrappers, selling gives rise to Capital Gains (£11100 annual allowance), dividends give rise to income tax (£5000 dividend allowance, and maybe some of your personal allowance). Ideally you'd want to fully utilise both allowances.
You'd get the dividend on one or the other either way.

Are you sure?

Lets say, non-hypothetically that i have a share with a dividend of 10p a share due (ex div date) in exactly one months time. Do you think it will rise by 10p (over what it would otherwise have moved) between now and then (or maybe some of that is already baked in)? Or will it fall 10p the morning after it goes ex-div?

To answer another Q all my shares apart from a few US one are in ISAs or SIPPs so tax is not an issue.

bowlhead99

AnotherJoe wrote: »

Are you sure?

Lets say, non-hypothetically that i have a share with a dividend of 10p a share due (ex div date) in exactly one months time. Do you think it will rise by 10p (over what it would otherwise have moved) between now and then

No of course not. You know now, and everyone else knows now, that they are going to pay 10p out of their bank account, *out of money they have already earned*, in a month's time.

And when they pay it out, they will no longer have it, so each share will be worth 10p less than what it would have been worth if they hadn't paid the 10p out. So no, the share price will not rise by 10p over what it would have otherwise risen, as we approach ex div date. Why would it?

(or maybe some of that is already baked in)?

Everything everyone already knows (like the forthcoming dividend) is baked in. Plus a great deal of what is not known but is rumored, speculated, anticipated or expected.

Or will it fall 10p the morning after it goes ex-div?

To correct your wording... it will fall 10p the morning it goes ex-div. Not the morning after the morning it goes ex div.

If you sell a share ex-div (i.e. without the right to receive the div) then the amount you should get for the share is the amount you would have got for selling the share with the right to receive the div, less the amount of the div. It's not rocket science.

In some circumstances it could be possible that there are some fans of the company who really really really don't want to receive a dividend for some reason (maybe tax perhaps) and so perhaps would be willing to let you take the 10p dividend and only reduce your sale price by 9.9p instead of 10p. But mostly that won't happen; many institutional investors are tax exempt pension funds anyway and have much larger holdings and order sizes than you when it comes to gobbling up examples of quirky demand signals.

Maybe I've missed the point you were trying to make?
But basically you said:

I've some investments i want to sell in order to buy some others, for rebalancing as it happens. I'd do it right now but the ex-div date on both is only a month away so i will hold.

From this I understand you want to sell something and but something new, and the ex div on both is the same. So, you could sell before the ex div date and qualify for the div on the new one while being disqualified from the div on the old one. Or you could wait til the ex div date before selling the old one, then you would keep the div on the old one and miss the div on the new one.

Either way, as Eco said, "you'll get the dividend on one or the other either way". To which you said "are you sure". How could we not be, unless we misunderstood you somehow?

But whatever, regardless of waiting for the ex div date, you have already got the VALUE of the div because we all know it is coming and its value is priced into the current, cumdiv price. Its value will no longer be priced into the share price once the share price is trading ex div: its value will at that point be separately owed to whoever qualified for it.

atush

planteria wrote: »

agreed, and if i could take sentiment out - which is impossible, then i would definitely cut losers quicker and run winners harder..

To take sentiment out, invest in good long term dividend increasing yearly ITs.

The price of the units would not matter overmuch going forwards, as you will be spending the income/yield which can (and has for decades) increased.

You can also have a bond/guilts fund which does the same.
Although wont have a multi-decade increase rate.

A cash sump of 2-3 years outgoings is also a good idea

Eco_Miser

AnotherJoe wrote: »

Are you sure?

Bowlhead said it so much better than I could.
In the scenario you presented (selling one share, buying another, both with the same ex-dividend date) you will be entitled to exactly one of the dividends whenever you do the buy/sell. If you managed to sell with-dividend and buy ex-dividend you'd miss out on the dividend, but that doesn't match with what you said.