Keep RSU or reinvest the money?

btcp

Notepad_Phil said:

Digital Equipment was at one time the second largest computer company in the world (behind IBM). The fact that you've never heard of them gives some indication of what happened to the share price. It fell by more than 50% within the year in the late 80s when their problems first started. Ten years later the price had never recovered and actually was down about another half at the time of the takeover/merger and during that time more than half of the employees had been jettisoned. Many of these had big percentages of their wealth tied up in Digital stocks as they had invested when they had only seen the share price rise and then never got around to selling them, as of course the price would surely recover

Thanks for sharing this story. I was too young in 80th to care about finances, or technology it’s understandable why I’ve never heard of it. 

Eco_Miser

btcp said:

 Mergers is a normal practice in tech these days, and quite often the stocks of an acquired company rise in price after they merger with a bigger one. 

How does that happen? If the company has been acquired, all the stock has been bought by the acquiring company, and the acquired company delisted, so no price at all.

btcp

Eco_Miser said:

btcp said:

 Mergers is a normal practice in tech these days, and quite often the stocks of an acquired company rise in price after they merger with a bigger one. 

How does that happen? If the company has been acquired, all the stock has been bought by the acquiring company, and the acquired company delisted, so no price at all.

Yes, the technicalities are as you described, I didn’t define it correctly in my post. I suppose what I meant is that if  employees of the acquired company hold stocks, they are not losing them when the acquisition happens but may actually gain more. That’s what I’ve heard from people who worked for companies that were acquired by the one I work for. 

steampowered

btcp said:

I have VLS but the question is which one to get if I sell stocks. Over the last 2 years I put some money in 60, 20, 80 and 100 with an idea that the higher risk ones  are there for a longer term and the lower ones are there in case I would want to access the money sooner. Interestingly, my 100 is underperforming while 60 & 80 have relatively high growth. The 20 has 1-2% growth on and off.  It’s probably because I bought them all in different times, and I am now trying to drop feed in the 100 and see if it evens out. But I also think I have too many, so maybe having 20 and 100 is enough.  I already had this discussion but just didn’t make up my mind what’s the best course of actions. 

VLS 100.

You were perfectly happy to take the risk of losing all of your RSU money by keeping it in a single share, so you should be happy to take the risk of the VLS 100 investment!

By moving from a single share to a passive fund you are already de-risking your investment, so it seems unnecessary to choose a lower risk version of the fund.

Your VLS100 might have underperformed because there was a stock market drop last year due to Covid. That happens from time to time.

VLS 100 will have higher returns than 20/40/60/80 over the long term - that's almost a statistical certainty - but it will be more volatile.

btcp

steampowered said:

VLS 100.

You were perfectly happy to take the risk of losing all of your RSU money by keeping it in a single share, so you should be happy to take the risk of the VLS 100 investment!

By moving from a single share to a passive fund you are already de-risking your investment, so it seems unnecessary to choose a lower risk version of the fund.

Your VLS100 might have underperformed because there was a stock market drop last year due to Covid. That happens from time to time.

VLS 100 will have higher returns than 20/40/60/80 over the long term - that's almost a statistical certainty - but it will be more volatile.

This makes perfect sense, thank you. Would you recommend to dump a large amount in this fund at once or divide up into portions and buy monthly? Say we are talking about 17k which is left on my ISA annual allowance this year. 

MX5huggy

If you are going to put this money into VLS100 (or any other index) come hell or high water between now an April. Then it depends on if you think there will be a fall between now and then. Otherwise it’s better to go all in now. It’s doesn’t matter what happens after April, if there’s a fall it would of been better to of gone all now because thats when the units were cheaper. If it keeps rising then all in now is also best. https://youtu.be/DMznHFuGJr4

Albermarle

This makes perfect sense, thank you. Would you recommend to dump a large amount in this fund at once or divide up into portions and buy monthly? Say we are talking about 17k which is left on my ISA annual allowance this year. 

It is a question that gets asked a lot.

The answer is that statistically it is better to invest all of it now .

However if you feel uncomfortable with that due to the possible risk of a large market fall just after you invest , then split it up. Not necessarily monthly but say 40% now ; 30% in 3 months and 30% in 9 months , or something like that.

btcp

Deleted_User said:

OTOH, if you feel uncomfortable about that, then VLS100 is probably too high risk for you.

(steampowered's argument, that VLS100 is a step down in risk from shares in a single company, was perfrectly valid. However, I suspect that the premiss, that you were perfectly happy to take the risks of losing all your money in a single share, wasn't true after all.)

 No I wasn’t happy to lose all of my money. I realised that my conclusions about the shares being safe and growing based on what I know about the company were not too good. I am planning to sell and reinvest now. My understanding is that VLS 100 includes multiple stocks therefore a risk of losing all the money and never recover is not so high. I understand volatility, but more looking at a long term. 

Albermarle

My understanding is that VLS 100 includes multiple stocks therefore a risk of losing all the money and never recover is not so high. I understand volatility, but more looking at a long term. 

You are correct , the chance of total loss with VLS 100 is pretty non existent . Even a 50% loss would be dramatic and if you hung on long enough it would most likely recover , maybe quite quickly but maybe not.

steampowered

btcp said:

This makes perfect sense, thank you. Would you recommend to dump a large amount in this fund at once or divide up into portions and buy monthly? Say we are talking about 17k which is left on my ISA annual allowance this year. 

Yes, I would recommend putting the full amount in now.

Drip feeding reduces your investment returns, since you miss out on investment growth and dividends for the time you are not in the market.