Is it possible to cash in on a funds growth like with shares?

isayhello

I've just begun to invest in a S&S ISA with Vanguard and it's the first time I'm investing in funds, I wanted to understand something around the growth of the fund and how to take a profit, might be best to explain with an example, with a share lets say Apple, if the price goes up from 1 dollar to 2 dollars and you sell, then you've cashed in your 1 dollar profit. You can then wait if the share price drops again and buy back at 1 dollar again in the future but your profit of 1 dollar is now yours.

Is it possible to do something similar with funds inside or outside an ISA say like the life strategy 100%, where if you see the fund growth has gone up by £100 to somehow cash that increase out and buy again when the fund value drops?

For something like Apple, I know you can track the share price and company news to make a decision, how do you track the price of a fund e.g. life strategy 100% and its investments to decide if it will go up or down? I don't see any easy way to do this.

Am I right in thinking then that the only way to make money from the fund is to just keep invested and hope that the value keeps increasing, without being able to cash out any increases in the fund value beforehand?

jimjames

Yes it's entirely possible to do that if you want. There is nothing to stop you selling or buying at any point. Some funds may have an additional levy applied to purchases but the main issue you'll have is trying to time it to get in and out of the market. Which platform are you with as that will determine if it's easy or not but I've yet to come across any that make selling difficult.

What happens if the price doesn't drop and you have to buy back in at a higher price?

Thrugelmir

By cashing in and banking profits. You'll miss out on dividends and other income/capital distributions made by company's when you aren't fully invested. This income being reinvested and generating further income. Market low points quickly come and go. Miss them and your overall returns are likely to be diminished. 

Then you've the additional difficulties of currency exchange rates and once a day pricing to buy/sell to contend with. Meaning that in part you'll be in the dark. Compared to investments that can be traded instantly. 

kinger101

You're trying to time the market.  There's no convincing evidence anyone you can do this.  With your Apple example, you could have purchased it in Nov 2004 for $1.  Then sold it in Nov 2005 for $2.  Although the price fell after that, it never reached $1 again and now stands at $133 dollar.

Funds are generally less volatile, and somewhat less likely to half in value compared to individual stocks.  Crashes are inevitable, but without knowing when the peaks and troughs might be, you'll more likely lose out than remaining vested.

Eyeful

The professionals use high speed computers to try and time the market as you suggest and they still find it difficult. You with your limited resources are unlikely to do so consistently and make a profit. 

You need.to get your timing right consistently. Every time you go into & out of the market there is a cost to paid. With funds you will not know what price you have sold at until the next trading day. If you use an ETF, there will be broker fees to pay going & out. 

If you stay around long enough, you will find there will be times where you will be encouraged to actively trade in shares. Told how people have made fortunes. These stories are spread by those with a vested interest in you trading. What is not mentioned is just how hard it is to do in practice and come out with a profit consistently.  

LHW99

Its difficult with OIEC's as they are not (usually?) bought / sold at an immediate market price. IT's and ETF's can be but they usually also have dealing charges.

isayhello

@Thrugelmir Thanks but some funds I'm in such as the life strategy 100 don't pay a dividend I think, so the value is purely down to how well the companies are doing in there right? I take your point about timing the market being difficult though.

isayhello

Thanks for the replies, one question as I've opened these funds in an ISA, if I do buy and sell them, are they still held within the isa for instance if a 20k initial investment goes up to 24k and I sell those funds, am I still in the ISA? can I still invest 24k? or back to 20k again?

Thrugelmir

isayhello said:

@Thrugelmir Thanks but some funds I'm in such as the life strategy 100 don't pay a dividend I think, so the value is purely down to how well the companies are doing in there right? I take your point about timing the market being difficult though.

Within each of the underlying funds the dividends received from the underlying companies will be reinvested back into the same fund. Though much of the cash received will be used to pay management fees etc. 

Thrugelmir

Eyeful said:

The professionals use high speed computers to try and time the market as you suggest and they still find it difficult. 

Not if you are the hedge fund providing services to Robinhood. As you'll be able to trade stocks knowing what the retail investors are trading ahead of the game. Only requires slithers on bulk transactions to generate decent profits. 

Peter314

isayhello said:

@Thrugelmir Thanks but some funds I'm in such as the life strategy 100 don't pay a dividend I think, so the value is purely down to how well the companies are doing in there right? I take your point about timing the market being difficult though.

VLS products are available in which dividends are automatically reinvested (accumulation) or paid out (income).

income here: https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-lifestrategy-100-equity-income