Enthusiasm for investing in an overpriced (?) equity fund

dark.knight_3

hopefully someone can help me out here. I fully understand that investing is for the long term but with having a bit of cash ready to invest following a few regular savers maturing. I currently invest in (amongst others) the Vanguard FTSE world excl. UK (FPD0) which lets say i put 10k in earlier on in the year when the value was 216.58 per unit. The value now sits at 258.05 which seems to have massively increased with the bad pound and brexit. My dilemma is, what benefit would i now get by putting money into this at this moment. I know you shouldn't try to time the market but this seems a bit overpriced. Would it be better to sit in cash until the price corrects itself or are there benefits to investing it at this value?

AnotherJoe

If you genuinely think it's overpriced, then why haven't you sold all your current units? If you believe the fund will drop significantly in price and that's putting you off buying, its illogical not to sell what you already have and then buy back later when it's cheaper.

If your argument is "but that would be market timing" , well exactly, and so is not buying now.

Superscrooge

If much of the rise in value is due to the fall in value of the pound, then world equities haven't seen a massive increase. How much have they increased when priced in US dollars?

There were plenty of people suggesting shares were due for a correction earlier this year. Anyone following their advice and selling would have missed out on double digit gains.

Buy and hold is usually a better tactic than trying to time the market.

Pincher

Do it for tax reasons.

So you bought at 216.58 per unit, and it's now at 258.05.

If you profit take at 258.05, you can use up some CGT allowance.

In one month plus one day, you buy back in at 258.05 again, to avoid the bed and breakfast rule. If it goes up, the base for calculating gains is now 258.05.

Now, if it drops to 216.58, you have the option of selling at 216.58, and record the loss for carrying forward, and use it against future gains. Or you can do nothing.



If you did not profit take, and it falls to 216.58, you are back to square one, no recorded loss for use in the future.

AnotherJoe

Or you could just hold it in an ISA and avoid all that faff.

Pincher

AnotherJoe wrote: »

Or you could just hold it in an ISA and avoid all that faff.

And I would, if the Treasury let's me put more in.

It is actually a good thing to have a reserve of losses, which could be useful when you are on the threshold of tax bands.

Savings Allowance going from £1,000 down to £500 might be averted if you could apply a judicial amount of losses to stay in basic rate tax. 40% tax! Yuck.

Glen_Clark

Pincher wrote: »

If you profit take at 258.05, ...............In one month plus one day, you buy back in at 258.05 again,.

How do you know the price will be the same when you buy back in?

Pincher

Glen_Clark wrote: »

How do you know the price will be the same when you buy back in?

If you really don't want to be out of the market, you can buy an equivalent instrument, but that is going to incur transaction cost.


I'm doing this with Lloyds.

Sold 100,000 shares at 62.8p outside an ISA, to crystalise a gain (from 53.8p), which I will be paying 10% CGT on.
Bought 70,000 shares at 61.3p inside an S&S ISA. Not enough cash in the ISA to buy 100,000, but 70,000 is close enough.

If it shoots up to 69p, the gain is partially protected by the 70,000 shares inside an ISA.

Ideally, I will buy back the 100,000 shares in January, re-basing the capital gains at ~63p. Then, when the price is right, sell the 70,000 shares inside the ISA.

I know it's cheating, using another wad of money to take over the price watch, but since they don't let you do bed and breakfast any more, I have to find a way.

slowpoke_rodriguez

When is "earlier in the year"?

darkidoe

Pincher wrote: »

And I would, if the Treasury let's me put more in.

It is actually a good thing to have a reserve of losses, which could be useful when you are on the threshold of tax bands.

Savings Allowance going from £1,000 down to £500 might be averted if you could apply a judicial amount of losses to stay in basic rate tax. 40% tax! Yuck.

I wish I had all your troubles and problems.

Glen_Clark

Pincher wrote: »

It is actually a good thing to have a reserve of losses, which could be useful when you are on the threshold of tax bands.

But don't you have to forgo your CGT allowance for that year before you can build up a reserve of losses.?
I just switch from one ETF to a similar (costs £5.95 x 2 with x-o, very low spreads and no stamp duty)