Baillie Gifford American B Acc - What To Do?

GSP

aroominyork said:

GSP said:

NoviceInvestor1 said:

BG American has a pretty average track record, aside from one good year in 2020. A lot of people will have bought it after it’s incredible year and are nursing big losses. 

Generally speaking the fund invests in blue sky junk at ridiculous valuations, at one point it was on 120 x earnings. It was a crash waiting to happen, yet the managers were insistent they wouldn’t be taking profits on stocks that had quintupled in a year.

As for your IFA, am I correct in my understanding of their strategy - they put you into yesterdays winners after a period of outperformance, wait for it to underperform and then dump them (crystallising a loss)? How has your overall portfolio performed using this IFA?

While this investment is down over this 50%, my overall pot is down c20% since last December. Be interesting as well to hear how others on here have fared?
And if they have let things ride, or taken action?

World equities are down 8-10% since December so this suggests you are quite aggressively positioned. When you chose that strategy, did you consider what you would do if it took a hit?

I requested that I had a year’s anticipated amount held in a cash for withdrawals. I suppose the proof will be when this is used.

GazzaBloom

I sold my BG American in 2021 and bought the L&G Global Technology Index Trust to satisfy my growth/tech stock appetite, it's more diverse with around 280 companies held rather than BG American's 40 so it's not exposed to the same level of volatility if one of the stocks tanks or goes to the moon.

It too is down this year to date, around 19% but nowhere near as much as BG American and it has performed to a similar level in the past albeit with a bit less volatility that BG American.

Hopefully tech and growth stocks will see a return to gains in the coming year or two.

JohnWinder

How often should you rebalance?

Once a year is fine. 

I think the first mention of rebalancing in this thread might not be rebalancing since it added BG, and yearly the advisor ditches the worst 2 funds. That’s certainly changing the balance of funds but it’s not rebalancing in the sense of bringing the portfolio back to the balance of stocks/bonds/etc that is desired as the principal objective for either risk control of profit taking.
If we’re talking about my ‘real’ rebalancing, there’s at least 2 questions: when should you consider it, and what’s the threshold to do it?
If the threshold is simply ‘once a year is fine’, then you could miss rebalancing opportunities during the year, and rebalance unnecessarily every year. And if ‘once a year’ is the time to consider it, you could still miss the mid-year opportunity. Isn’t the time to rebalance when a threshold is reached/passed, and the time to consider doing it is as often as is needed to catch the threshold? You could set a computer to do that, and ignore it until it alerted you to crossing a threshold.
As to rebalancing each year, or 4 yearly as Jim Otar suggests, in a long up market each time you sell the ‘winner’ to buy the laggard you miss potential gains in the winner you sold; similarly in a long down market, selling higher than you could have by waiting. By contrast, in a swinging market you can sell some winner (and buy the laggard), only to see the winner fall back again and give another chance to repeat the gains compared with not rebalancing. 
So I don’t think rebalancing gives an assured return compared to not rebalancing: in a long trending market you seem to lose out; in a swinging market you can gain if your timing matches the swinging cycle.
Then there’s the cost. There might be trading costs, buy/sell losses, taxes, front load costs, and advisor costs for the work they do. I’m far from sure it’s going to be profitable, and then there’s the emotional struggle: shares are rising nicely, so we sell some to buy bonds which are falling? That’s not so easy to do. Or shares are crashing through 30% since last year, and you’re wondering if you should sell the bonds which are holding steady to buy more collapsing shares? It’s not easy.
Rebalancing only fully makes sense to me as a way of keeping your risky/less risky assets in the proportions you can tolerate. Even then, if you’re a 60/40 guy, and equities rise to make you 70/30 (you’d want to cheer) but now you have to sell out and go back to 60/40, rather the keep the opportunity to go to 80/20 but risk falling back to 60/40 which would be no loss at all overall. Again, not an easy decision without a rigid strategy.
Lastly, if you’re 60/40 or 70/30, it takes quite a lot of price movement to get you out of whack by even 5 percentage points. I doubt once a year is at all needed.

GSP

JohnWinder said:

How often should you rebalance?i

Once a year is fine. 

I think the first mention of rebalancing in this thread might not be rebalancing since it added BG, and yearly the advisor ditches the worst 2 funds. That’s certainly changing the balance of funds but it’s not rebalancing in the sense of bringing the portfolio back to the balance of stocks/bonds/etc that is desired as the principal objective for either risk control of profit taking.
If we’re talking about my ‘real’ rebalancing, there’s at least 2 questions: when should you consider it, and what’s the threshold to do it?
If the threshold is simply ‘once a year is fine’, then you could miss rebalancing opportunities during the year, and rebalance unnecessarily every year. And if ‘once a year’ is the time to consider it, you could still miss the mid-year opportunity. Isn’t the time to rebalance when a threshold is reached/passed, and the time to consider doing it is as often as is needed to catch the threshold? You could set a computer to do that, and ignore it until it alerted you to crossing a threshold.
As to rebalancing each year, or 4 yearly as Jim Otar suggests, in a long up market each time you sell the ‘winner’ to buy the laggard you miss potential gains in the winner you sold; similarly in a long down market, selling higher than you could have by waiting. By contrast, in a swinging market you can sell some winner (and buy the laggard), only to see the winner fall back again and give another chance to repeat the gains compared with not rebalancing. 
So I don’t think rebalancing gives an assured return compared to not rebalancing: in a long trending market you seem to lose out; in a swinging market you can gain if your timing matches the swinging cycle.
Then there’s the cost. There might be trading costs, buy/sell losses, taxes, front load costs, and advisor costs for the work they do. I’m far from sure it’s going to be profitable, and then there’s the emotional struggle: shares are rising nicely, so we sell some to buy bonds which are falling? That’s not so easy to do. Or shares are crashing through 30% since last year, and you’re wondering if you should sell the bonds which are holding steady to buy more collapsing shares? It’s not easy.
Rebalancing only fully makes sense to me as a way of keeping your risky/less risky assets in the proportions you can tolerate. Even then, if you’re a 60/40 guy, and equities rise to make you 70/30 (you’d want to cheer) but now you have to sell out and go back to 60/40, rather the keep the opportunity to go to 80/20 but risk falling back to 60/40 which would be no loss at all overall. Again, not an easy decision without a rigid strategy.
Lastly, if you’re 60/40 or 70/30, it takes quite a lot of price movement to get you out of whack by even 5 percentage points. I doubt once a year is at all needed.

A lot of questions and thoughts there John.
All interesting paragraphs, but I was more drawn to the last two.

When you said if equities rise to 70/30 from 60/40, it does beggar the question should any profit be taken then. Okay, they might go to 80/20, but at some point these will go down, and perhaps to the 60/40 level and there does not seem much point in having them if they return to the same point, or even fall lower if you timed going in wrongly.
But quite what that point is when you take any profit, without getting too greedy and just accept it may go up more after you take any action.

dunstonh

Then there’s the cost. There might be trading costs, buy/sell losses, taxes, front load costs, and advisor costs for the work they do. I’m far from sure it’s going to be profitable,

No trading costs
No buy/sell (bid/offer) costs
No taxes
no front load costs
no adviser costs (initial)

most of those don't exist in the UK now with the most common investment universes.

and then there’s the emotional struggle: shares are rising nicely, so we sell some to buy bonds which are falling? 

This thread gives you a good example of why.  What goes up comes down. What goes down comes up... sooner or later!

Generally, over the long term, rebalancing will lower returns as you prevent the portfolio from going higher in risk.  It reduces behavioural risks too.  Someone comfortable with 50/50 may not be comfortable with 70/30.  50/50 will become 70/30 without rebalancing at some point.

ChainsawCharlie

GSP said:

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

Sounds to me like you have the same "Numpty" IFA I had....before I gave the halfwit the boot.
So the IFA uses the ongoing to make knee jerk reactions in the name of rebalancing?

GSP

ChainsawCharlie said:

GSP said:

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

Sounds to me like you have the same "Numpty" IFA I had....before I gave the halfwit the boot.
So the IFA uses the ongoing to make knee jerk reactions in the name of rebalancing?

I’m not quite 5 years into drawdown, so probably still early doors for me in terms of assessing my IFA. Last year was a very good year, as it probably was everyone else’s.
Just how scientific should this all be?
There does not appear to be one set of rules and strategy people should follow, because someone will always find fault in these.

Thrugelmir

GSP said:

ChainsawCharlie said:

GSP said:

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

Sounds to me like you have the same "Numpty" IFA I had....before I gave the halfwit the boot.
So the IFA uses the ongoing to make knee jerk reactions in the name of rebalancing?

There does not appear to be one set of rules and strategy people should follow, because someone will always find fault in these.

If everybody followed the same strategy then markets would no longer be efficient. 

GSP

Thrugelmir said:

GSP said:

ChainsawCharlie said:

GSP said:

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

Sounds to me like you have the same "Numpty" IFA I had....before I gave the halfwit the boot.
So the IFA uses the ongoing to make knee jerk reactions in the name of rebalancing?

There does not appear to be one set of rules and strategy people should follow, because someone will always find fault in these.

If everybody followed the same strategy then markets would no longer be efficient. 

I was meaning the people who frequent on here. 😀

Malthusian

GSP said:

Just how scientific should this all be?

Scientific enough to eliminate non-systemic risk as far as practical, and balance the desire/need for long term growth with the need to not panic or have sleepless nights. While not so scientific that you get Canute-like delusions of being able to control the markets.
Dumping the two worst performing funds each year is very much at the "art" end of the art/science spectrum. And by that I mean the Jackson Pollock "throw stuff around at random" end.