When to take profits?

BigSpenderLittleSpender

AsifM068 said:

Linton said:

AsifM068 said:

OK. So in times of growth, I have more units where as I thought the number of units stays the same and the value / NAV per unit increases instead, can someone please clarify?
So the number of units decreases when the fund dips?

The price per unit decreases when the fund dips and vice versa.  WIih a fund the NAV is the price.  However if you sell you obviously have fewer units.

That was my understanding in regards to the NAV price but someone on here has stated that the number of units goes up and down which I didn't know and has confused me unless I misunderstood which is a very real possibility!

Your number of units stays the same until you buy some more.  If you sell £400 the number of units you hold will decrease.

AsifM068

BigSpenderLittleSpender said:

AsifM068 said:

Linton said:

AsifM068 said:

OK. So in times of growth, I have more units where as I thought the number of units stays the same and the value / NAV per unit increases instead, can someone please clarify?
So the number of units decreases when the fund dips?

The price per unit decreases when the fund dips and vice versa.  WIih a fund the NAV is the price.  However if you sell you obviously have fewer units.

That was my understanding in regards to the NAV price but someone on here has stated that the number of units goes up and down which I didn't know and has confused me unless I misunderstood which is a very real possibility!

Your number of units stays the same until you buy some more.  If you sell £400 the number of units you hold will decrease.

This was my original understanding. Many thanks for this👍

penners324

With the news that omicron variant is probably a lot milder than delta variant the stock markets have gone back up and your investment is probably worth month now than yesterday.

AsifM068

penners324 said:

With the news that omicron variant is probably a lot milder than delta variant the stock markets have gone back up and your investment is probably worth month now than yesterday.

Great stuff - thanks 👍🙂

ChesterDog

AsifM068 said:

Linton said:

AsifM068 said:

OK. So in times of growth, I have more units where as I thought the number of units stays the same and the value / NAV per unit increases instead, can someone please clarify?
So the number of units decreases when the fund dips?

The price per unit decreases when the fund dips and vice versa.  WIih a fund the NAV is the price.  However if you sell you obviously have fewer units.

That was my understanding in regards to the NAV price but someone on here has stated that the number of units goes up and down which I didn't know and has confused me unless I misunderstood which is a very real possibility!

I think you misinterpreted what I said.

In your "taking profits" scenario, the number of units you hold goes down.

That's because you will have sold some.

AsifM068

ChesterDog said:

AsifM068 said:

Linton said:

AsifM068 said:

OK. So in times of growth, I have more units where as I thought the number of units stays the same and the value / NAV per unit increases instead, can someone please clarify?
So the number of units decreases when the fund dips?

The price per unit decreases when the fund dips and vice versa.  WIih a fund the NAV is the price.  However if you sell you obviously have fewer units.

That was my understanding in regards to the NAV price but someone on here has stated that the number of units goes up and down which I didn't know and has confused me unless I misunderstood which is a very real possibility!

I think you misinterpreted what I said.

In your "taking profits" scenario, the number of units you hold goes down.

That's because you will have sold some.

All clear now (took a while!) and many thanks for your help ChesterDog.

tebbins

Another thing you aren't getting is that acc funds do not take dividends to buy more *units*, they take the dividends to buy more *shares* (or whatever it owns). The number of units changes only because and when people buy or sell their units in their funds and the fund manager creates or redeems (i.e. cancels) those units accordingly. The two things are completely separate.
When the value of the shares in the fund increases or decreases, the fund manager does nothing - you can't sell shares to buy more of the same shares. If you bought 500 Unilever shares 10 years ago, you could use the dividends to buy more shares, but if you sold the "gain" you made now in order to "buy more"... It just doesn't make sense. You would lose money on dealing fees.

AsifM068

tebbins said:

Another thing you aren't getting is that acc funds do not take dividends to buy more *units*, they take the dividends to buy more *shares* (or whatever it owns). The number of units changes only because and when people buy or sell their units in their funds and the fund manager creates or redeems (i.e. cancels) those units accordingly. The two things are completely separate.
When the value of the shares in the fund increases or decreases, the fund manager does nothing - you can't sell shares to buy more of the same shares. If you bought 500 Unilever shares 10 years ago, you could use the dividends to buy more shares, but if you sold the "gain" you made now in order to "buy more"... It just doesn't make sense. You would lose money on dealing fees.

Thank you for this👍

isayhello

For my own understanding there is a scenario though where you could take the profit of £400 in expectation that the NAV will drop and then rebuy more units at a cheaper price so you could end up with the same number of units and a "profit". I know it's risky but am I right in thinking it's possible?

Alexland

isayhello said:

I know it's risky but am I right in thinking it's possible?

Of course it's possible but you are betting against a market that tends to go up and the unit price may never go as low again so on average it's not a good strategy.