Switching funds in a volatile market

RetSol

I am looking to switch my unit trust holdings into income funds and away from growth orientated funds.  My funds have taken a battering of late but I have owned several of them for 10+ years and they are still showing a healthy profit over that period.  Some are more recent acquisitions and are in the red.  My proposed switches have nothing to do with the current crisis in the markets.  I am planning on taking semi-retirement soon and want to take income from my units.  I feel like a dunce but I am struggling to work out whether the current volatility in the market means that it is a bad time to do this.  Should I hold off for the time being or plough on regardless - possibly switching funds on a very gradual basis ?  

Thrugelmir

There's no certainty that all companies will be in a position to maintain dividends at existing levels or continue to pay them at all for a period of time. There'll be more immediate demands upon their cash resources. Dividends are bottom of the list. As the days pass the weakest are going to fail. That's an unfortunate certainty. 
Don't chase income on historic yield figures. Think carefully and research before selecting any investments. 

RetSol

Thank you, Thrugelmir, for your wise words.  The challenge going forward will be finding any research that is worth the paper it's written on in the post C-19 world.
Having spelt out the issue, I now think that I am suffering from an allergy to doing nothing.  It is hard to sit it out in the midst of the mayhem but I don't think that there is anything else for it. 

fun4everyone

RetSol said:

I am looking to switch my unit trust holdings into income funds and away from growth orientated funds.  My funds have taken a battering of late but I have owned several of them for 10+ years and they are still showing a healthy profit over that period.  Some are more recent acquisitions and are in the red.  My proposed switches have nothing to do with the current crisis in the markets.  I am planning on taking semi-retirement soon and want to take income from my units.  I feel like a dunce but I am struggling to work out whether the current volatility in the market means that it is a bad time to do this.  Should I hold off for the time being or plough on regardless - possibly switching funds on a very gradual basis ?  

I take your post to mean you are (rightfully) worried about the day or two you are out the market when you switch funds, because at the moment it appears to have a chance of being a large rally that you miss, given we are seeing huge daily swings both ways. Missing a single 9% up day would have a large impact on overall returns. This is always a problem with funds, the dealing is not instant like shares. A possible suggestion could be to do your switch in small chunks. For example if you wanted to switch £50k, instead of doing it all at once do 5x£10k switches waiting for one to complete before doing the next. You could also wait for the markets to calm down a bit before doing anything (although no predictions from me on when that will be). If you waited you could take income simply by manually selling some units.

Audaxer

I'm hoping that well diversified equity income funds and Investment Trusts are able to continue paying dividends, but I appreciate they may have to reduce payments. Some good equity income ITs have paid rising levels of dividends for decades as they are able to hold back income to allow them to continue to pay rising dividends in difficult times such as this. They currently have good yields due to the current market falls, so if you are going to move to income producing funds, this could be a good time, but it's so volatile and uncertain at present, I appreciate it's a very difficult decision, so you need to fully research such funds and ITs.

fun4everyone

double post by mistake

Thrugelmir

RetSol said:

Thank you, Thrugelmir, for your wise words.  The challenge going forward will be finding any research that is worth the paper it's written on in the post C-19 world.
Having spelt out the issue, I now think that I am suffering from an allergy to doing nothing.  It is hard to sit it out in the midst of the mayhem but I don't think that there is anything else for it. 

That's the normal reaction. A feeling that one has to do something. As I posted elsewhere the other day. As an investor learn to control your emotions. Become detached. 

Grandst2

How much of the dividends come from Shell and BP, the oil price has plummeted and their profits will turn to losses..

Sebo027

Grandst2 said:

How much of the dividends come from Shell and BP, the oil price has plummeted and their profits will turn to losses..

BP's share price has dropped below what is was during the Deepwater Horizon blow out in 2010. That is quite something, and what's more interesting, all oil operators are experiencing the same thing. The liabilities that hung around BP's neck as a result of the Macondo incident were in the tens of billions, the oil price crashed in 2014, and through it all, they continued to pay the dividend.

Username999

Brido88 said:

Grandst2 said:

How much of the dividends come from Shell and BP, the oil price has plummeted and their profits will turn to losses..

BP's share price has dropped below what is was during the Deepwater Horizon blow out in 2010. That is quite something, and what's more interesting, all oil operators are experiencing the same thing. The liabilities that hung around BP's neck as a result of the Macondo incident were in the tens of billions, the oil price crashed in 2014, and through it all, they continued to pay the dividend.

Good returns over the last 20 years (IMHO) ...
https://www.dividenddata.co.uk/dividend-history.py?epic=BP.
https://www.dividenddata.co.uk/dividend-history.py?epic=RDSB

RetSol

I like Fun's idea of selling some units if I need some cash.  I have been waiting 7 months for MyCSP to send me an accurate quotation of my civil service pension benefits. I am now getting concerned that C19 is going to cause further delays.  At least it's cheap staying indoors.