Do you take profits from top performing funds

Thrugelmir

ZingPowZing said:

Linton said:

ZingPowZing said:

The trend of the last ten years is that rebalancing has made poorer the investors on whom it has been practised: 
which is to say nearly everyone reading here..

What about the previous 10-15 years when failure to rebalance could have lost you a lot of money during the .com boom/crash or the next 10 years during which no-one knows what will happen?   People whose investing experience is limited to the past 10 years are sonner or later going to have an almighty shock.

Better to fail to attain the frothy peak of a boom than to risk the core returns gained when prices were lower.

Granted, earlier phases may have validated rebalancing. 
The trend will change again but it won't revert to its earlier template: that would be like looking in halfway through a Grand Prix and expecting the finishing order to revert to the starting grid. It's possible but it's never happened yet.

We seem to agree on something. The days of heavy industry , shipping, canal and railway stocks dominating the major indexes are well past. Never to return. Likewise the US being an emerging market. 

Prism

Rebalancing is more about reducing risk than improving returns.

Sea_Shell

What if you're actually selling units of a fund to live on (spend), which do you sell on a monthly basis?   I'm assuming the one that's performing best at the time, regardless of "where" in your portfolio that fund sits?  

Then after 6-12 months re-evaluate your overall funds and see if anything needs rebalancing, to get you back to your original % splits etc.?

Or would you ringfence a particular fund to withdraw from, regardless of it's performance?

Prism

Sea_Shell said:

What if you're actually selling units of a fund to live on (spend), which do you sell on a monthly basis?   I'm assuming the one that's performing best at the time, regardless of "where" in your portfolio that fund sits?  

Then after 6-12 months re-evaluate your overall funds and see if anything needs rebalancing, to get you back to your original % splits etc.?

Or would you ringfence a particular fund to withdraw from, regardless of it's performance?

If I was to want a monthly withdrawal I would only use the fund with the lowest volatility, so maybe a 1-5 year Gilt fund, but most likely cash. Anything else leaves you open to having to withdraw during a drop. So in answer to your question it would be a particular fund regardless of performance, because that kind of fund has a fairly predictable performance.

Rebalancing doesn't have to be exact so you could base it on thresholds like 5% over and maybe check once per year.

LHW99

Mostly I use dividends / new payments in to rebalance towards the mix I want (largely active funds / IT's, but a couple of smaller trackers). On the other hand I did sell down on LTI a few years back, taking out 50% every time it doubled, because it was a concentrated fund, and the premium was getting ridiculous. I sold out finally at a price just above what it is now, and may look to buy back sometime when I feel the price / premium justifies it. On the whole I either buy more of the ones that don't rise, or if I feel the reason for having them has changed / vanished sell out.

Voyager2002

homerhotspur said:

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?

Firstly, your post is about ISAs (plural), rather than an ISA's feelings (although you might ask questions about an ISA's contents).

Secondly, the answer to your question surely depends on the funds that you are employing. If your best-performing funds are free to invest across the global economy then the managers will be doing some re-balancing. If, OTOH, the stars of your portfolio were technology funds; or China funds; or renewable energy funds; then it would be sensible to move some gains out of these sectors and into the parts of the global economy that might be tomorrow's stars.

Personally, I am very glad that I rebalanced away from renewable energy earlier this year, but regret rebalancing away from technology late in 2018 and so missing some fantastic gains.

csgohan4

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?

if you didn't cash in on INRG, Vestas, SMT e.t.c you would be sitting on either a loss or reduced profit. So quite a bit of evidence. Thrugelmir has mentioned  they have sold their Vestas at a >90% profit, pretty good considering how much it has tanked recently. . 

Thrugelmir

Sea_Shell said:

What if you're actually selling units of a fund to live on (spend), which do you sell on a monthly basis?   I'm assuming the one that's performing best at the time, regardless of "where" in your portfolio that fund sits?  

Then after 6-12 months re-evaluate your overall funds and see if anything needs rebalancing, to get you back to your original % splits etc.?

Or would you ringfence a particular fund to withdraw from, regardless of it's performance?

Personally I'd be positioning the portfolio well ahead of the event. Not attempting to effectively time a particular market. Cashing in on the best performing individual fund of the month. 

How have you constructed your portfolio?   Is it winterised for drawdown?  Does your portfolio generate income (not high yield but has a degree of income focus) ? 

Sea_Shell

Thrugelmir said:

Sea_Shell said:

What if you're actually selling units of a fund to live on (spend), which do you sell on a monthly basis?   I'm assuming the one that's performing best at the time, regardless of "where" in your portfolio that fund sits?  

Then after 6-12 months re-evaluate your overall funds and see if anything needs rebalancing, to get you back to your original % splits etc.?

Or would you ringfence a particular fund to withdraw from, regardless of it's performance?

Personally I'd be positioning the portfolio well ahead of the event. Not attempting to effectively time a particular market. Cashing in on the best performing individual fund of the month. 

How have you constructed your portfolio?   Is it winterised for drawdown?  Does your portfolio generate income (not high yield but has a degree of income focus) ? 

It's a mixture of pensions, ISAs and fixed bond cash (due to mature).

We're at about 60% equities and 15% cash.   We've not done anything specific with it as we move to drawdown phase, other than removing the lifestyling from our pensions.

DH will begin drawing down later this year from his pension, for tax purposes, but this may not necessarily be the same money that gets spent IYSWIM. 

We could reinvest that, and spend the profit off our Rathbones 100% equity instead.

They are all ACC funds at present, so no actual income.

eskbanker

ZingPowZing said:

coyrls said:

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

What does that even mean?
Anyone can rebalance by reviewing relative performance of investments at some date (a date which is necessarily arbitrary).

It seems to me that you're interpreting the term differently from how it's generally used.  If we take the Investopedia definition as a starting point (other definitions are available!):

What Is Rebalancing?

Rebalancing is the process of realigning the weightings of a portfolio of assets. Rebalancing involves periodically buying or selling assets in a portfolio to maintain an original or desired level of asset allocation or risk.

For example, say an original target asset allocation was 50% stocks and 50% bonds. If the stocks performed well during the period, it could have increased the stock weighting of the portfolio to 70%. The investor may then decide to sell some stocks and buy bonds to get the portfolio back to the original target allocation of 50/50.

In other words, it's an activity specifically related to realigning a portfolio to its desired allocation, whether that's on the basis of target risk or across sectors.

Unless I'm misunderstanding your position on this, you're considering it as a more generic term that covers sales and purchases solely on the basis of relative actual or projected performance.  There may be overlap between these two perspectives but they're definitely not synonymous....