Rebalance portfolio funds in coronavirus?

sop12hw

Hi all,

Six months ago I started investing for the first time - I used 90% of my money to buy funds from a ready-made high risk portfolio. I then spent the last 10% on a couple of funds which I chose myself.

Most of the funds crashed with coronavirus and my portfolio is currently at a loss overall. I know I need to ride it out, but I have noticed that one of the funds I picked is an anomaly with a 20% gain(!) 

My question is - should I sell what I have 'gained' from this one fund now, and put the money into the other funds (currently at a loss)?

Thank you in advance for any help! 

dunstonh

My question is - should I sell what I have 'gained' from this one fund now, and put the money into the other funds (currently at a loss)?

You stick to your strategy, assuming it is sound and not random/made up.  And work on the principle of having your investments as if you were buying them fresh today (unless there is some contractual reason or tax reason preventing it)

sop12hw

Thanks @dunstonh - if I'm being truthful, I have very little strategy for the 10% funds- I did some research and thought they looked sound to invest in, and just wanted to have a go at picking funds myself!

george4064

Out of interest, which funds did you buy in both the ready-made pot and the ‘10% funds’?

Linton

When rebalancing you should take any emotion out of any decisions.  A good policy in my view is to rebalance on a fixed date each year and then only if the changes are greater than a preset %, say 3% or 5%. So I suggest you wait until the anniversary of your purchase.

Thrugelmir

Does the rational behind investing in the ready made high risk strategy still hold? Are the investments in a position to recover in the medium term? 

AnotherJoe

I "rebalanced" my long term index fund based SIPP, I had three funds in it, 70% global, 15% small cos,15% property. I sold the property and split 50/50 into the other two.
i think CV has had and will have a long term deleterious effect on commercial property to a level unseen in other more generic corrections, and so I've bailed out of it. 

Having said that I don't rebalance it generally I just let them run and woudl onky rebalance if they really got out of whack. After all my initial 70/15/15 had no science behind it. I tend to let my winners run. 

Other than that area, I don't think there's any major changes,    probably oil related stocks inevitable (IMNSHO) decline has been brought forward A few years ina more dramatic manner,  that would otherwise have happened gradually  . I'm managing that by investing in non fossil fuel energy stocks but have been doing so for a while. 

bowlhead99

sop12hw said:

Thanks @dunstonh - if I'm being truthful, I have very little strategy for the 10% funds- I did some research and thought they looked sound to invest in, and just wanted to have a go at picking funds myself!

Let's sat 10% of your money was £10,000 and you decided you liked the look of four funds equally which specialised in different things. So you put £2500 into each of them. Then one of them goes up by 20% (by £500, up to £3000 now) and the others each fall 20% (by £500, to £2000 now).
So now you have £3000/ £9000 (33%) in one fund and £2000/9000 (22%) in each of the others.  Is that a 'good' allocation?

If the initial allocation of 25/25/25/25 was only arbitrary or haphazard, with no science behind it in terms of what proportion was allocated to what industry sector, geography, asset class or strategy was being used for the money,  then arguably 33/22/22/22 isn't much worse, because there is still no science behind it, but relatively speaking you now have 50% more in Fund A than you have in any of B, C or D, which doesn't sound ideal.

It is not true that 'what goes up must come down', or vice versa, but most people would see the logic that if they wanted 'a bit of each' in the four funds, but now have a 'a lot of one and a little of the others' they are not really following the plan that they'd started to make for themselves.

Of course, if 10% of your money is £1000 and not £10000,and you are not looking to spend the money for a decade or more, it doesn't really make a great deal of difference to your life if you have split the £1000 as £300/200/200/200 or some other mix.  Probably you will add more money at some point in the future and you could change the overall allocations to whatever you want at that point.  Your easy choices are to either do nothing about it now - and come back to the question in six months or a year or never - or do something about it now, which involves considering what mix of portfolio you would actually like to hold.

MaxiRobriguez

I think it'd be interesting to see the funds purchased.

We'll be able to explain why you've gained 20% on one fund, and with that knowledge you can either decide to maintain your position or take the gains and rotate. If you don't know what's happening under the hood then you can't make any informed decision. 

sop12hw

Thanks everyone - that is all really helpful to think about. The Baillie Gifford Positive Change fund is the one that has rocketed, if anyone has any ideas why?

I'm hoping not to touch the funds for 5+ years. Really, I just started investing to try and learn more about it. Thanks for your thoughts about considering timeframe and reviewing portfolios @bowlhead99 and @Linton

@AnotherJoe thanks for sharing your experience. Interesting to try and hypothesize about what things are going to look like in the near future (part of the fun in investing I guess!)

Thrugelmir

sop12hw said:

Thanks everyone - that is all really helpful to think about. The Baillie Gifford Positive Change fund is the one that has rocketed, if anyone has any ideas why?

Start by looking at the funds factsheet. What are the top holdings?