Time to Sell Investments (Take the profit)

Audaxer

Linton wrote: »

Reducing risk reduces returns. Not only are you taking the risk that prices are higher when you want to re-buy but you would also miss out on dividends.

I agree, if however the market did drop 20% or more within a year or so of cashing in some equity from Acc funds, presumably it wouldn't matter if you missed out on reinvested dividends if you bought back at the reduced price? Am I right in thinking you would only miss out if you were actually in the deaccumulation phase and taking the dividends?

masonic

Audaxer wrote: »

I agree, if however the market did drop 20% or more within a year or so of cashing in some equity from Acc funds, presumably it wouldn't matter if you missed out on reinvested dividends if you bought back at the reduced price? Am I right in thinking you would only miss out if you were actually in the deaccumulation phase and taking the dividends?

In the first scenario, if you are lucky you'll buy back in at a price that outweighs the loss of dividends during the period you were uninvested. In the second scenario, you'd have a hole in your income stream that you'd need to fill by other means - possibly having less to spend buying back into the fund. But that could leave you up or down overall depending on the exact timing and market outcome.

Prism

Audaxer wrote: »

I agree, if however the market did drop 20% or more within a year or so of cashing in some equity from Acc funds, presumably it wouldn't matter if you missed out on reinvested dividends if you bought back at the reduced price? Am I right in thinking you would only miss out if you were actually in the deaccumulation phase and taking the dividends?

Thing is what happens if it goes up 20% before it drops 20%? Or doesn't drop at all. I imagine when we got the 10% drop this January then plenty of people sold out at this point and therefore missed out on much of this years gains. Its hard/impossible to know when its coming.

coyrls

Where are you "taking the profit" to? If ultimately you are going to reinvest it, you won’t have taken it anywhere.

Sue58

Linton wrote: »

Selling part of your equity portfolio could well be the right thing to do if the % equity allocation now exceeds your risk tolerance because you have changed, your circumstances have changed, or you got it wrong in the first place. But it is difficult to see how these reasons would cause you to sell everything, especially as you say you could re-enter the market at a later date.


Reducing risk reduces returns. Not only are you taking the risk that prices are higher when you want to re-buy but you would also miss out on dividends.

My risk tolerance hasn’t changed because as I mentioned we have a comfortable cash buffer, however, we have had such good returns that surely there comes a time when you ‘hedge your bets’ and possibly go into cash with a very good profit and see what happens. I totally understand we could lose future potential profits or may have to pay higher prices if we re-enter the market but imho the market just cannot go up, up and up?

Prism

Sue58 wrote: »

My risk tolerance hasn’t changed because as I mentioned we have a comfortable cash buffer, however, we have had such good returns that surely there comes a time when you ‘hedge your bets’ and possibly go into cash with a very good profit and see what happens.

Out of interest what percentage are you classing as good returns? Everyone has a different goal but my long term one is about 1500% over the course of my investment. That takes quite a few remaining invested

Sue58

Prism wrote: »

Out of interest what percentage are you classing as good returns? Everyone has a different goal but my long term one is about 1500% over the course of my investment. That takes quite a few remaining invested

As an example one of our pensions was worth £103,000 in December 2014 and it is now valued at £155,000 so that is good enough for us. Our other pension and isa’s have delivered similar returns hence why we think it may be time to take the profits and sit it out.

bostonerimus

kidmugsy wrote: »

It's striking that people who are dead set against market timing are often all for rebalancing, which is just a mild, rebranded form of market timing.

Rebalancing is different from timing the market because it uses a predetermined criteria to keep your asset allocation/risk profile constant. The OP is suggesting a one time gut move into cash which could be good or could be bad.

kidmugsy

Linton wrote: »

I dont see this at all.

OK: I have shares. I think "by golly the market has got very high, it's riding for a fall, I think I'll sell some". Boo, hiss, market timing.

You have shares. You think "by golly the market has got very high, and so I own proportionately more shares than I want, I think I'll sell some". Hurray, hurray, re-balancing.

bostonerimus

Sue58 wrote: »

As an example one of our pensions was worth £103,000 in December 2014 and it is now valued at £155,000 so that is good enough for us. Our other pension and isa!!!8217;s have delivered similar returns hence why we think it may be time to take the profits and sit it out.

If you are now looking to capital preservation then there's nothing wrong in moving from equities into cash and fixed income, but does your retirement income planning allow you to do that. Most people will require some portfolio growth to support a reasonable income. You need to do some planning and then come up with a plan to adjust your asset allocation to match your new requirements......selling and going into cash is probably only viable for people with large pension pots and modest income requirements. From your posts I think you plan is driven by nervousness rather than a cohesive plan.

I'm retired and I'm planning on at least 35 years before I die. So there'll be a couple of market cycles in there and I'll stay full invested for all that time as I want some growth. Studies show that maybe a 60/40 mix of equites and bonds give you the highest probability of successfully funding retirement. If you go all cash inflation will eat away at your money and what happens if you miss out on a big market gain. If you go all cash when will you get back into the market?