Can funds actually go bust?

aroominyork

I just had a look at India Capital Growth which like Jupiter India invests in SMEs. Since the second week of August the NAV has fallen about 18% but at the same time the discount has narrowed from 17.5% to 7%. Does that suggest the low NAV is attracting buyers and demand is exceeding supply?

atush

Prism wrote: »

Absolutely.

As an attempt to explain some of the drop, firstly over the last 12 months the pound is up 9.5% on the Rupee so thats a pretty big hit to performance.

Secondly, most indian debt is in dollars and the dollar is up 12.5% over the Rupee so India's debt just got much more expensive. This causes problems with many of Jupiter India's financial holdings

Several of Jupiter India's top holdings are in downstream oil companies which do well when the oil prices are lower.. but they are up 47% over the year - and also priced in dollars.

I have a small allocation to Jupiter India and don't see any permanent worries with it as it stands

I would consider it a possible buy opportunity.

OP, while funds can theoretically fail, it would be very hard to do so as all the companies owned by the fund would need to drastically fall/fail.

Perhaps if the entire countrys economic system collapsed, or the govt of the day nationalised everything etc.

AnotherJoe

aroominyork wrote: »

I do not hold Jupiter India but I do hold India Capital Growth which is very similar; I am now wondering why I hold such a niche fund and I do not have a good enough answer, so as and when (and if...) it recovers most of its losses I will be selling it.

That's an easy trap to fall into. Your loss is a sunk cost, its gone, its happened, it should have no bearing on what you do going forward.

To imagine you should hold on because of that loss is illogical as is to hold on in the belief it will spring back If you do think it will spring back, put more in and hold it, the figure you bought at is an arbitrary point and maybe it will climb much higher.


You should imagine that you have whatever sum you currently have invested in ICG, as cash instead, to invest in something. Would it be ICG? ? Would it be "X" fund "? If the latter, sell ICG and buy Fund X. If the former, stick with ICG.

To make this real,I'm in a similar boat, I invested in BYD at (from memory, $20-ish). Its now about $14. So I've lost a third of my investment. If i had $14k to invest in BYD today, would I? Yes. So I'm sticking with it. If the answer was "no" I'd buy something else.

As for being "just ****ed off" why and with who? Its illogical to think all your investments will always be up. Thats just not going to happen.

aroominyork

AnotherJoe wrote: »

That's an easy trap to fall into. Your loss is a sunk cost, its gone, its happened, it should have no bearing on what you do going forward.

To imagine you should hold on because of that loss is illogical as is to hold on in the belief it will spring back If you do think it will spring back, put more in and hold it, the figure you bought at is an arbitrary point and maybe it will climb much higher.

You should imagine that you have whatever sum you currently have invested in ICG, as cash instead, to invest in something. Would it be ICG? ? Would it be "X" fund "? If the latter, sell ICG and buy Fund X. If the former, stick with ICG.

To make this real,I'm in a similar boat, I invested in BYD at (from memory, $20-ish). Its now about $14. So I've lost a third of my investment. If i had $14k to invest in BYD today, would I? Yes. So I'm sticking with it. If the answer was "no" I'd buy something else.

As for being "just ****ed off" why and with who? Its illogical to think all your investments will always be up. Thats just not going to happen.

Sure I understand your point but looking at the IT's performance and the underlying macro factors, I think there is a good enough chance it will bounce back (and then possibly bounce back down again). I understand why others on this thread see it as a buying opportunity but for me it is a 'hold'. Of course, your point is (kinda) that there is no such thing as a hold - it's either buy or sell and I understand that too; like in poker, if it's good enough to call it's good enough to raise.

Thrugelmir

aroominyork wrote: »

I do not hold Jupiter India but I do hold India Capital Growth which is very similar; I am now wondering why I hold such a niche fund and I do not have a good enough answer, so as and when (and if...) it recovers most of its losses I will be selling it.

The mantra normally is run your winners and cut your losses. Hanging on in quiet desperation is the English way.

seacaitch

aroominyork wrote: »

For relatively inexperienced investors (which I count myself; I do not know about the OP) these kind of falls in single funds are quite useful as they let us assess our risk tolerance in bite size chunks, rather than waiting to experience all global markets falling together with say 30% wiped off. When starting to DIY invest after a long bull run, it's easy to convince yourself your risk tolerance is higher than it really is; having a single fund take a hit is a good way to assess whether your overall portfolio is positioned correctly.

I think a significant advantage of global multi-asset funds, for all investors but particularly the inexperienced, is that they help mask from the holder the underlying volatility of the component asset classes and holdings.

Someone who holds a niche fund (asset class) as part of a sensible overall portfolio should, in theory, be able to 'mentally' do this themselves, ignoring individual component volatility and focusing on the portfolio as a whole instead. But in practice it often doesn't happen like that, as the OP illustrates.

In my view, the greater the "distance" that the average investor can put between the market and themselves, the better. By attenuating the market's noise and volatility, the lesser the chance you'll fall prey to acting upon your emotions rather than adhering to your investment plan.

Global multi-asset funds, matched to an investor's goals and risk tolerance, are a great way of achieving this. Let the managers of the fund deal with the portfolio's component volatility and any rebalancing - they'll have systems in place to help them do this much better than many investors will be able to do so themselves. By outsourcing the portfolio management, you're also outsourcing many of the sources of stress - and potential for making expensive errors.

This is one key reason I believe OEIC global multi-asset funds are a better option for many people than constructing their own portfolio using individual ETFs, even if the resultant asset allocation ends up identical. Come a deep market downturn, when some portfolio components see very significant losses and others see gains, I expect many with ETF-based portfolios will find it hard to continue executing their rebalancing rules and instead may find themselves under emotional pressure to sell out of holdings that have cratered in order to make the emotional pain stop, and clinging on to any asset classes that have risen.

During periods of market stress, what feels emotionally "comfortable" to do is often the wrong thing to do, and acting in this manner will impairs returns, possibly significantly.

Best to think about things like this in the good times and not during the depths of a bear market!

aroominyork

Thrugelmir wrote: »

The mantra normally is run your winners and cut your losses. Hanging on in quiet desperation is the English way.

See post #8. Discuss.

Rheumatoid

But how can it be doing so badly? It is on HL's Wealth 150+ list :rotfl:

I hold some by the way

AnotherJoe

aroominyork wrote: »

Sure I understand your point but looking at the IT's performance and the underlying macro factors, I think there is a good enough chance it will bounce back (and then possibly bounce back down again). I understand why others on this thread see it as a buying opportunity but for me it is a 'hold'. Of course, your point is (kinda) that there is no such thing as a hold - it's either buy or sell and I understand that too; like in poker, if it's good enough to call it's good enough to raise.

Not really. My point was that hanging on until a stock gets back to where you bought at (been there done that) is illogical because theres nothing magic about the price you bought at*.

If you bought at 100 and it fell to 70, i can see you might research and decide it could now rise back to 85 or 90 or 125 for reasons you've worked out, so you'll hold til then but just hoping it rises back to where you bought it, why? Whats the key about why that price is the next peak?

* except of course you can say "well I never made a loss on that". BUt you could bea long time waiting while other stuff is rising. I'm £7k down on my BYD. Its happened. I think it will rise and my timing was rubbish, but I have no illusions it "ought" to rise to the $20 I bought at. (I bought it because I think there's a chance it will get to $200 so this is just a speedbump on the way. I am however cognizant it could crash into the speedbump or a pothole and be a wreck as well)

aroominyork

AnotherJoe wrote: »

Not really. My point was that hanging on until a stock gets back to where you bought at (been there done that) is illogical because theres nothing magic about the price you bought at*.

If you bought at 100 and it fell to 70, i can see you might research and decide it could now rise back to 85 or 90 or 125 for reasons you've worked out, so you'll hold til then but just hoping it rises back to where you bought it, why? Whats the key about why that price is the next peak?

* except of course you can say "well I never made a loss on that". BUt you could bea long time waiting while other stuff is rising. I'm £7k down on my BYD. Its happened. I think it will rise and my timing was rubbish, but I have no illusions it "ought" to rise to the $20 I bought at. (I bought it because I think there's a chance it will get to $200 so this is just a speedbump on the way. I am however cognizant it could crash into the speedbump or a pothole and be a wreck as well)

Understood (and thanks) but I'm not planning to get it all back. I'm currently showing a £2600 loss, down c.20%. My sell trigger is at a £1000 loss.