Merchants Trust Sell or Hold?

Stirfry

Whilst other Funds in my portfolio have done OK to well, Merchants Trust is always showing a loss. Its early days for my portfolio as I have only just started investing in the last 3/4 months. I INTENDED to leave well alone until investing further funds in October, but should I fiddle while Rome burns? Brexit and MRCH invested in UK markets.

One of My reasons for investing in MRCH in the first instance was because of the high Dividend payments, (Im looking for income).Should I wait for the first Dividend payment in mid August accept my losses then sell?

I would very much appreciate anyones thoughts on the Fund in question. Has anyone held MRCH over a longer period of time?

You can see I am new to this and am still trying to get my head around rebalancing. If I have made an obvious mistake in setting up my portfolio, I don't wish to bury my head in the sand and ignore it.

ColdIron

It's a high yielding IT doing what it says on the can. If you are getting cold feet after small movements over a few months you may be invested way over your risk profile. I'd take the opportunity to review my whole approach to investing. Sorry, but you did ask

Stirfry

ColdIron, thanks for the reply. I'm a big girl and can stand the criticism. I just haven't had the experience of when to weed out the mistakes yet.

I am also worried about being too heavily invested in the UK, about 35% of my overall portfolio.

Linton

According to Trustnet in the past 3 months Merchants Trust is up about 2% if you include dividends. In the past 6 months its up about 8%. If you are to invest in the markets you need to be prepared for falls over a few months of up to around 50%.

The best way to make a loss on your investing is to buy when shares are doing well with high prices and sell when they are doing less well, so guaranteeing a loss. It is more sensible to invest with the intention of never selling. You bought MRCH because it pays high dividends. Has it stopped paying high dividends?

bowlhead99

As Coldiron said, 3-4 months is too short a time to judge. Presumably it has not massively changed its investment thesis that delivered the last few decades of performance, which was presumably the basis for your investment - and you have to take the ups with the downs and vice versa.

If you no longer want it, it makes no real sense to "hold on for the dividend". At such time as the next dividend becomes payable to the investors of the trust (same logic also applies for other types of funds), the relevant cash in the bank account becomes formally owed to the investors creating a liability of the fund. This reduces the fund's net assets by the amount it owes to its investors. So, instead of having an investment worth £x in your left hand you end up with cash in your right hand (or owed to you) of £y and an investment in your left hand that is worth less money by the amount of that cash in your right hand.

The dividend now becoming formally receivable by you does not change your overall assets. It may however create a tax liability if you've not got any annual dividend allowance left.

As an aside, 35% overall in UK (ie about two thirds of your assets not in the UK), is not outrageous. It depends what the purpose of the investment is, but if you are living your life in the UK it can make sense to have a lot of your assets there, even though the UK represents only a relatively small part of the global economy and world stockmarket and bond market and property market.

Malthusian

Did you expect none of your investments to fall in value within a three to four month time period? If the answer is yes then yes you did make a mistake, as your portfolio should have been 100% cash deposits.

If the answer is no then you only need to have the courage of your convictions.

35% is more than most would have in the UK, but I would not suggest selling out of the UK and buying other geographic sectors as a) it is not a dangerously high amount b) in 3/4 months' time you will find another reason to chop and change your portfolio and that is how you lose money.

Stirfry

Thanks for all the replies. It gives me confidence to leave well alone for now.

Reaper

Merchants Trust has increased its dividend every year for the last 35 years. While there are no guarantees having bought it for income I see no reason to sell now.

Thrugelmir

Stirfry wrote: »

Whilst other Funds in my portfolio have done OK to well, Merchants Trust is always showing a loss.

Did you expect it to return an immediate profit?

With 20% of the trust invested in just 4 shares. Glaxo, BP. HSBC and Shell. Performance capital wise is correlated very closely to the share performance of these companies. Whether to buy or sell should be less about the trust and more about the individual shares. Personally I'd hold and buy further on weakness. When the discount widens out.