Do I transfer now to VLS

Huggy_Bear

I'm trying to reduce my risk to 100% equities in my current fund (Invesco High Income) which I've had or a while and transfer to VLS 40%  do I just bite the bullet and transfer now while both funds are low? My logic is that when the market picks up again I'd rather have my investment in VLS

Can someone with a lot more experience than me help me understand if this strategy is sensible?

HB

masonic

It's impossible to say which course of action will lead to the better action, but in general if you have invested above your risk tolerance, it is sensible to address that. VLS 40 has fallen about 3%, while Invesco High Income has fallen 13%. Those figures probably don't include today's falls. There is certainly scope for further losses, which as the figures outline will be much less severe in the lower risk Vanguard fund. However, today might be the low point in the market. Could you stomach another 10% drop?

OldMusicGuy

Huggy_Bear said:

My logic is that when the market picks up again I'd rather have my investment in VLS

I'm struggling to see the logic here. When the market picks up again you want more equity-based holdings because they will recover faster than VLS40. You don't want to be in VLS40 when the market picks up, you want to be in it when the market falls. Full disclosure - the majority of my portfolio has been invested in VLS40 for some time to protect against downturns like this, but I am newly retired and in the decumulation phase, so that made sense for me. 

Overall it depends on your investment objectives and how long you can stay invested for. Do you crystallize the losses you have made and move to VLS40 (bear in mind you could lose a chunk more if the market falls as you transfer), or do you bite the bullet and wait for the inevitable recovery? 

Huggy_Bear

masonic said:

It's impossible to say which course of action will lead to the better action, but in general if you have invested above your risk tolerance, it is sensible to address that. VLS 40 has fallen about 3%, while Invesco High Income has fallen 13%. Those figures probably don't include today's falls. There is certainly scope for further losses, which as the figures outline will be much less severe in the lower risk Vanguard fund. However, today might be the low point in the market. Could you stomach another 10% drop?

Thank you this is what I'm trying to think through.

I do have a chunk in fixed term savings but the invesco fund is above my risk tolerance

I'm I right in thinking that the VLS is likely to be less severe due to the high bond element.

Huggy_Bear

OldMusicGuy said:

Huggy_Bear said:

My logic is that when the market picks up again I'd rather have my investment in VLS

I'm struggling to see the logic here.

That's why I've posted the question - I'm not an experienced investor and haven't seen losses like this before, so its good to get others logic - thank you

masonic

Huggy_Bear said:

masonic said:

It's impossible to say which course of action will lead to the better action, but in general if you have invested above your risk tolerance, it is sensible to address that. VLS 40 has fallen about 3%, while Invesco High Income has fallen 13%. Those figures probably don't include today's falls. There is certainly scope for further losses, which as the figures outline will be much less severe in the lower risk Vanguard fund. However, today might be the low point in the market. Could you stomach another 10% drop?

Thank you this is what I'm trying to think through.

I do have a chunk in fixed term savings but the invesco fund is above my risk tolerance

I'm I right in thinking that the VLS is likely to be less severe due to the high bond element.

Yes, the VLS fund is much less volatile due to its bond holdings, and the fact it is globally diversified (being global isn't much help in this specific instance, but can be beneficial in others). Bonds have been rising in value recently, balancing out some of the falls in equities.

mcooke999

Why are you trying to reduce your risk in the first place? When do you need access to this money?

pip895

Swapping the fund now would be little better than selling 60% of your investment.  
When thinking about your risk tolerance - when you consider your cash as part of your investments - is your equity percentage still too high?  Is your cash fund as large or larger than your investments? If it is then perhaps you could consider buying your VLS 40 fund with some of the cash and not touching the IP fund or simply swapping the IP fund out for a fund such as VLS100.  If your cash fund is smaller or you just cant face buying more equity then my recommendation is to do nothing and avoid thinking about your investments for a few months!

Huggy_Bear

mcooke999 said:

Why are you trying to reduce your risk in the first place? When do you need access to this money?

I dont need the money any time soon. I have a chunk in fixed term savings and I have a smaller chunk in shares through a share save scheme (which I've done well out of those, they recovered a bit last week but have taken a fall again today) I sold some at a 52 week high.

Overall the reason for reducing my risk is I'm not earning a f/t salary. I work p/t on a fixed term contract. I do intend to return to f/t work and while I am in that situation I dont feel comfortable with nearly 44% of my portfolio in the invesco fund.

AlanP_2

Huggy_Bear said:

mcooke999 said:

Why are you trying to reduce your risk in the first place? When do you need access to this money?

Overall the reason for reducing my risk is I'm not earning a f/t salary. I work p/t on a fixed term contract. I do intend to return to f/t work and while I am in that situation I dont feel comfortable with nearly 44% of my portfolio in the invesco fund.

So have you just started this P/T job?

If you have then your concern has some foundation, but if you have been in that job for a while presumably you weren't worried about the 44% allocation to Invesco until it started to fall.

What I am trying to identify is are you concerned because markets are falling or are you concerned because your personal situation means 44% in one conviction based fund is high risk at the current time?