Do you take profits from top performing funds

homerhotspur

Voyager2002 said:

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.

You are so right. I am embarrased to have put the apostrophe in the wrong place !!

coyrls

ZingPowZing said:

coyrls said:

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

What does that even mean?

Nothing if you don't know what an asset allocation model is.

george4064

I tend to rebalance my ISA with new contributions, only on rare occasions do I partially sell down a security (share, IT or ETF) to re-invest in another holding to bring them closer to target allocations.

arnoldy

I avoid selling good performers unless they really become grotesquely significant. After all if you followed the "selling the winners" strategy you would have sold out of Microsoft, Tesla, Amazon many (10-20) years ago! Rather than 10X + your money.

Eco_Miser

arnoldy said:

I avoid selling good performers unless they really become grotesquely significant. After all if you followed the "selling the winners" strategy you would have sold out of Microsoft, Tesla, Amazon many (10-20) years ago! Rather than 10X + your money.

No, you wouldn't. You would have sold part of your holdings in those companies, and still be holding rather more than you paid for them. meanwhile you would also have bought Facebook, Netflix and Tencent with the money you took out.  Maybe.

Or maybe you would have sold one or more of them as 'losers' when they dipped.

Linton

Eco_Miser said:

arnoldy said:

I avoid selling good performers unless they really become grotesquely significant. After all if you followed the "selling the winners" strategy you would have sold out of Microsoft, Tesla, Amazon many (10-20) years ago! Rather than 10X + your money.

No, you wouldn't. You would have sold part of your holdings in those companies, and still be holding rather more than you paid for them. meanwhile you would also have bought Facebook, Netflix and Tencent with the money you took out.  Maybe.

Or maybe you would have sold one or more of them as 'losers' when they dipped.

or you wouldnt have bought them at all preferring to spend your money on one of the many other high flying companies that went bust when the dot com boom crashed.  

Thrugelmir

Linton said:

Eco_Miser said:

arnoldy said:

I avoid selling good performers unless they really become grotesquely significant. After all if you followed the "selling the winners" strategy you would have sold out of Microsoft, Tesla, Amazon many (10-20) years ago! Rather than 10X + your money.

No, you wouldn't. You would have sold part of your holdings in those companies, and still be holding rather more than you paid for them. meanwhile you would also have bought Facebook, Netflix and Tencent with the money you took out.  Maybe.

Or maybe you would have sold one or more of them as 'losers' when they dipped.

or you wouldnt have bought them at all preferring to spend your money on one of the many other high flying companies that went bust when the dot com boom crashed.  

BT springs to mind. Though obviously didn't go bust. 

[Deleted User]

eskbanker said:

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....

Perhaps I misunderstand "rebalancing."
I'm happy with the Investopedia definition but I do think rebalancing is synonymous with the performance of holdings in a portfolio. Rebalancing is only necessary when - as they must - relative performances diverge?

[Deleted User]

Thrugelmir said:

Linton said:

Eco_Miser said:

arnoldy said:

I avoid selling good performers unless they really become grotesquely significant. After all if you followed the "selling the winners" strategy you would have sold out of Microsoft, Tesla, Amazon many (10-20) years ago! Rather than 10X + your money.

No, you wouldn't. You would have sold part of your holdings in those companies, and still be holding rather more than you paid for them. meanwhile you would also have bought Facebook, Netflix and Tencent with the money you took out.  Maybe.

Or maybe you would have sold one or more of them as 'losers' when they dipped.

or you wouldnt have bought them at all preferring to spend your money on one of the many other high flying companies that went bust when the dot com boom crashed.  

BT springs to mind. Though obviously didn't go bust. 

https://www.google.com/search?q=british+telecom+share+symbol&oq=british+telecom+share+symbol&aqs=chrome..69i57j0i22i30l3.14051j1j15&sourceid=chrome&ie=U

Do you suppose, over the last ten years, rebalancing your BT holding against cash on this anniversary would have made you richer or poorer?

Thrugelmir

ZingPowZing said:

Thrugelmir said:

Linton said:

Eco_Miser said:

arnoldy said:

I avoid selling good performers unless they really become grotesquely significant. After all if you followed the "selling the winners" strategy you would have sold out of Microsoft, Tesla, Amazon many (10-20) years ago! Rather than 10X + your money.

No, you wouldn't. You would have sold part of your holdings in those companies, and still be holding rather more than you paid for them. meanwhile you would also have bought Facebook, Netflix and Tencent with the money you took out.  Maybe.

Or maybe you would have sold one or more of them as 'losers' when they dipped.

or you wouldnt have bought them at all preferring to spend your money on one of the many other high flying companies that went bust when the dot com boom crashed.  

BT springs to mind. Though obviously didn't go bust. 

https://www.google.com/search?q=british+telecom+share+symbol&oq=british+telecom+share+symbol&aqs=chrome..69i57j0i22i30l3.14051j1j15&sourceid=chrome&ie=U

Do you suppose, over the last ten years, rebalancing your BT holding against cash on this anniversary would have made you richer or poorer?

Dot Com era BT was over £20. Expectations simply didn't materialise. At the time I was firmly in the Woodford camp of investing. Dot Com IPO's such as Last Minute were for stagging only. Maximum subscription, sell and reinvest.