What percentage of losses on a fund?

cattie

I think this is probably one for the not so knowledgable investor rather than the very experienced. I know that quite a few investors have already rebalanced or sold off funds that have dropped in price during the crisis, but it got me wondering if there was a particular percentage loss that would make you want to pull out of a particular fund & if so, what percentage of loss is a trigger for you to sell?

I've just let things be & whilst one or two funds did dip into a 20+% loss, they have risen since, still a showing a loss of around 9% on 2 of my funds, but neither are my largest holding & of course I hope that they will pick up in the future. I haven't decided if there's a point where a certain loss would make me decide to sell these. 

Prism

For me it would be nothing to do with the loss. If a fund is no longer doing what it originally did, maybe due to a change in style or manager I would consider dropping it. If I found a better fund that suits my purpose I would drop the old one or ones. For example a couple of years ago I used regional smaller company funds (Japan, US, UK and Europe) but have since shifted to a global model for those types of funds.

Linton

Although it is common with investng in individual shares, IMHO selling a fund because it has made a particular loss is a basic mistake.  Doing this repeatedly could be disastrous.  Unlike shares a mainstream fund will almost certainly never drop to zero assuming we arent in an end of the world scenario.  Therefore given enough time it will probably recover.

Without too much thought I can only think of 2 good reasons to sell a fund:

1) You need the money

2) You buy a fund for the long term to fill what would otherwise be a hole in your wider portfolio.  The fund or your wider portfolio has changed so that particular fund is no longer the most appropriate.

AnotherJoe

Same as Prism, whether I sell an investment depends not how much it's fallen, but what I think it's future prospects are (because what it did in the past is somewhat irrelevant) and what I might replace it with that I think will do better.
A few examples, I wanted exposure to EVs, bought BYD (a chinese company). That halved over the next year. I sold and replaced with (much more) Tesla, which is up 3x. But in between and quite recently they dropped by perhaps 60% and I should have bought more but decided I had too much money / % my investments in it already so didn't. But I held. Because I thought it would come back. Which it did. 

My property index fund lost 20%.Ive decided the property market is going to be so fundamentally altered / affected (in a bad way) by C19 there was no point hanging on, I split the money between the other two investments I hold in that SIPP. 

Apple fell maybe 30% recently. I held. 

So in summary that's 

Fall 50% sell
Fall 60% hold
Fall 20% sell
Fall 30% hold 

Sailtheworld

I'd only sell if I thought my strategy was flawed and / or my appetite for risk had changed or was incorrect.

The recent market falls did make me question whether I'd got the strategy and / or my assessment of risk correct but being 20 odd % down is a really bad time to try and make a rational decision. I make a proper decision on April 10th each year which is when I top up my SIPP - even if I thought my approach wasn't quite right I'd try and hold out until then before doing anything.

I do keep an eye out for lower charges but, apart from a few trades last October, a mop up of dividends in January and a top up in April I've done nothing.

BrockStoker

Agree with the other replies. Percentage falls don't necessarily mean anything. It's what causes them that matters, and signals weather you should sell/hold/buy.

Thrugelmir

Depends on the fund itself, i.e. the nature of it. Whether the fall is due to the underlying investments held with in the fund as opposed to more general market conditions. Alternatively whether the fall is predominantly down to currency exchange rate fluctuations. 

Does the rational behind buying the fund originally still hold?  Have you identified a better opportunity for the reinvesting the money elsewhere?  Would you add further money to the fund now, is the lower price a buying opportunity? 

Very easy to hold onto bad investments in the hope of a price recovery.  In a crisis situation likewise easy to panic and sell too quickly. View your investments in a detached unsentimental manner. 

Old_Lifer

Viewing your investments in a detached  unsentimental manner  as  Thrugalmir  says,  reminds me of something  I heard  years ago  which went  something like this:

     ' If your investment falls sharply  and you cannot decide  whether to keep it or sell,    forget that you own it and look at it through fresh  eyes.    Imagine you have a pile of cash to invest.   With the investment as it now  stands would you invest  in it   or would you look elsewhere to invest the money ?      If you would invest, continue holding ,   if  you would look elsewhere, sell.'

Another way  of looking at the problem  perhaps.

barnstar2077

I don't think I would go by the percentage.  A big drop would make me do some investigating and I would then decide what to do based on that.

LHW99

It also depends on the general market - this year everything has been affected (almost) its not particularly surprising that any given fund may be off its high point. If the market generally is rising, but a fund you hold is falling, then that is certainly a trigger for closer examination IMO as to whether its one to buy more of or to get out of.