Baillie Gifford American B Acc - What To Do?

GSP

My IFA suggested this investment during a portfolio rebalance in Oct ‘20.

It performed well, very well in fact, but like a lot of investments has fallen since the end of the year and since December it’s fallen over 50%.

On the whole everything is down and the whole pot is down 20%.

When my next rebalance comes in the Autumn, what do you think with this investment? It seems to have gone down so much how much further can it fall?

This investment is now only 4% of my total and my IFA may suggest dumping it as he usually dumps the two worse performing investments over the year.

My thoughts are it may take a while but to sit tight on this one and keep it. Actually thinking about it when investments are reviewed, there must be an argument to say the top performing investments should go as how much is left in them to bolster the pot.

Thanks

JohnWinder

My IFA…. usually dumps the two worse performing investments over the year.

Actually thinking about it when investments are reviewed, there must be an argument to say the top performing investments should go as how much is left in them to bolster the pot.

Oh, how prescient. Or have you read this?
‘…the authors find that investors who chose managers with poor recent performance earned higher benchmark-adjusted returns than those who chose managers with superior recent performance. Their findings pose a challenge for asset owners: If past performance is used at all in selecting managers, it is the best-performing managers who should be replaced, not the underperforming ones.’

Does Past Performance Matter in Investment Manager Selection?    Bradford Cornell, Jason Hsu and David Nanigian.  The Journal of Portfolio Management Summer 2017

https://jpm.pm-research.com/content/43/4/33

Or this: ‘…from a practical or decision-making perspective, it reinforces the notion that choosing between active funds on the basis of previous outperformance is likely a misguided strategy.’

https://www.spglobal.com/spdji/en/spiva/article/us-persistence-scorecard

InvesterJones

GSP said:

My thoughts are it may take a while but to sit tight on this one and keep it. Actually thinking about it when investments are reviewed, there must be an argument to say the top performing investments should go as how much is left in them to bolster the pot.

Balancing is normally done in order to ensure your portfolio continues to match your investment strategy. If the strategy hasn't changed then it would normally involve buying more of sectors that aren't doing well (which would now be taking up a smaller portion of your portfolio) and selling sectors that are (now taking a larger portion), so that the overall balance gets back to what you wanted. So similar to what you were thinking above.

Your IFA may be instead suggesting changing strategy, or changing fund choice with the intention of keeping in the same sector just with a different fund.

coyrls

GSP said:

This investment is now only 4% of my total and my IFA may suggest dumping it as he usually dumps the two worse performing investments over the year.

Such a strategy would not fill me with confidence in the IFA.

Thrugelmir

Why wait until the autumn to review and rebalance. Discuss with your IFA now. Markets are in a very different place than in Oct 20. 

The question to ask is there a better place to be invested. 

Thrugelmir

coyrls said:

GSP said:

This investment is now only 4% of my total and my IFA may suggest dumping it as he usually dumps the two worse performing investments over the year.

Such a strategy would not fill me with confidence in the IFA.

Loss aversion is the downfall of many a investor. 

dunstonh

BG American has been a very good fund to hold in a rebalancing portfolio as the technology gains have been rebalanced off over the years leaving a lesser amount to fall.   However, BG American has a history of having a year or two of underperformance when cycles change before then returning to doing well.   It may not happen again but that is a decision to be made.

As such BG American makes a good satellite fund but not a good core fund.  

JohnWinder

Good or bad, satellite or whatever, at 4% of the portfolio it’s not going to make much difference.

csgohan4

writing was on the wall for sometime for the US markets. Glad I dumped at some profit last year, same with China as well

eastmidsaver

i think with rebalancing they say sell some of your winners, and buy more of your losers... as stated by someone above.
this goes with the principle of selling high,  buying low.     but also as pointed out, it maintains your original risk intention too.
in terms of whether to keep the fund,  that's your choice.   BG do however have a decent long term track record, and you have to accept with high growth stocks there will be uncomfortable periods.  be interesting to know what you decide.

GSP

eastmidsaver said:

i think with rebalancing they say sell some of your winners, and buy more of your losers... as stated by someone above.
this goes with the principle of selling high,  buying low.     but also as pointed out, it maintains your original risk intention too.
in terms of whether to keep the fund,  that's your choice.   BG do however have a decent long term track record, and you have to accept with high growth stocks there will be uncomfortable periods.  be interesting to know what you decide.

Thank you all for your comments. Thought this might provoke a bit of debate!

I’ve been meaning to look at the few investments that have been discarded in the past because of poorer performance, then to see how they have done recently.

Yes agree eastmidsaver, this is not a sprint and at times, maybe all the time you should just sit tight.

As for a decision this time round, depending what the IFA wants to recommend I could be having more of a conversation this year.