Do you take profits from top performing funds

homerhotspur

I've had isa's for a few years now with a diverse bunch of funds. I tend to do a bit of a re-balance of sorts each year based on general advice but have never actively reduced my holdings in my best performing funds to re-distribute elsewhere. I know many people will have a set position such as once a fund has made a certain percentage gain they will sell half and re-invest elsewhere. I have , probably, 3 or 4 funds which have performed exceptionally. On the basis that you don't actually make a gain ( or loss) until selling, should I really be taking some profit as a matter of course to put elsewhere? Or, should I have faith in the fund manager that they will effectively already be doing this within the fund itself? I'm wondering if this practice is more relevant to single share investing?

Prism

I generally keep my fund allocation in balance by additional contributions to the lower performing funds - assuming I keep the funds.

dunstonh

but have never actively reduced my holdings in my best performing funds to re-distribute elsewhere.

You wouldn't do that specifically.

Rebalancing to your desired weightings would take care of that for you.

I know many people will have a set position such as once a fund has made a certain percentage gain they will sell half and re-invest elsewhere. 

Not usually.  Some may but its not commonplace.

However, it could depend on your investment strategy.   You say you have rebalanced. That would suggest you are using single sector funds (single sector as in IA sectors).   If you are not following a sector allocated portfolio approach then how are you rebalancing and why hasn't that been taking into account the funds with higher growth?

stephenadarglas

I do take the profits however I'm taking my total return from a pension pot as and when is required/desirable.  However, never when showing a loss and I'm also in funds that naturally rebalance e.g. Lifestrategy.

Linton

I dont think that "taking profits" makes sense for a fund.  Since the fund invests in perhaps hundreds of companies it wont suffer to anything to the same extent as occurs with self-reinforcing over-enthusiasm for individual shares.  All funds need is rebalancing perhaps once a year or when they get over planned weight by more than say 5%.  In that way you get some advantage from momentum but  keep to your long term strategy.

Thrugelmir

Broadly speaking there's harm in running your winners. Though understanding what's driving the underlying performance is key.  A fund can hold as few as 30 to as many as several thousand companies. Momentum drives markets both upwards and downwards. Normally to extremes causing an overshoot. 

What are the funds in question? What % do they represent of your overall portfolio? 

Is your portfolio actually well diversified. Multiple holdings can actually end up being  highly correlated to each other. 

Moe_The_Bartender

The only question that matters is whether you would buy the fund again at the current price. If yes,hold. If not, sell.

[Deleted User]

Thrugelmir said:

Broadly speaking there's harm in running your winners. 

With respect, Thrugelmir, that's completely the wrong way round on the evidence of the last ten years.
You have been sitting out certain stocks/sectors for about a decade. Where do you get the authority for your quote above?

coyrls

You can only rebalance if you have an asset allocation model to rebalance to.

homerhotspur

Thanks, all interesting points. I think I was more thinking about banking some profit from successful funds rather than re-balancing as such.  I probably got distracted by an article which must have been about individual shares and, in theory, it should be down to the fund manager to do this on our behalf.

Thrugelmir

ZingPowZing said:

Thrugelmir said:

Broadly speaking there's harm in running your winners. 

With respect, Thrugelmir, that's completely the wrong way round on the evidence of the last ten years.
You have been sitting out certain stocks/sectors for about a decade. Where do you get the authority for your quote above?

I don't recall ever publishing my portfolio or my trading activity. Likewise I have the advantage of having more than the past 10 years evidence to call upon. That's no quote it's a personal opinion.