selling at loss and reinvesting in something else?

Linton

eastmidsaver said:

hi,
i have a portfolio of about 7 or 8 funds..... all of them are down.   
some are down more than others,  but i think the average loss in the portfolio is about 25% 
before the crash ii was around 10% up,  so it's been a big drop.
i am thinking of selling them all and just reinvesting into something else.
unsure if this is a wise thing to do...  or just keep holding .

I fear you are on the verge of making a common mistake ...

Your funds (A) have performed badly over the past few months, so you sell them for less than they cost, making a loss.  You buy a new set of funds(B), presumably those that have peformed well over the same time period as there would be no point in buying other funds that have also performed poorly.  But as they performed well they are relatively expensive.  In a year's time the economic climate changes and your new set of funds perform badly whereas the old funds perform better.  What do you do?

Keeping to your logic you sell B potentially at a loss and buy back A.  So your investment pot may get smaller each time the market changes direction.

A better approach is firstly to understand why portfolio A performed poorly.  It is likely that most similar funds performed in a similar way.  So it was nothing to do with the funds in particular but rather in what sort of things they invest.  You may decide that that you still want to invest in those sectors as they should recover when conditions change.

An even better approach I believe is to invest as broadly as possible so that whatever happens you get some winners and some losers but overall your total wealth should steadily increase over time as the profits made by companies throughout the world are either reinvested or returned to you as dividends.

talexuser

That's a big drop which shows some risk in your portfolio. An e.g. world tracker I have is 7% down from absolute peak of the market last November, and my funds in total between ISA 10 and general account 15% down again from absolute peak, a reflection that they improved on a tracker in the good times but may fall more in bad. The tracker will not outperform some of your choices if we enter another bull run, but with global interest rises and inflation I doubt we will have some of the gains as fast as the recent past. It is never a good idea to sell at a loss since in time things may recover, it depends how long you can wait. I would look at your maximum risk funds and maybe change some of those rather than the whole lot at one time. That would be unlikely to wipe out loses in a short time and would still need some good luck in the new choice if you expect instant improvement.

Albermarle

talexuser said:

That's a big drop which shows some risk in your portfolio. An e.g. world tracker I have is 7% down from absolute peak of the market last November, and my funds in total between ISA 10 and general account 15% down again from absolute peak, a reflection that they improved on a tracker in the good times but may fall more in bad. The tracker will not outperform some of your choices if we enter another bull run, but with global interest rises and inflation I doubt we will have some of the gains as fast as the recent past. It is never a good idea to sell at a loss since in time things may recover, it depends how long you can wait. I would look at your maximum risk funds and maybe change some of those rather than the whole lot at one time. That would be unlikely to wipe out loses in a short time and would still need some good luck in the new choice if you expect instant improvement.

As Dunstonh pointed out in an earlier post, it could also be the portfolio is in mainly in traditional low risk gilts and bonds, which have performed unusually badly recently. In which case the losses are going to be slow to recover significantly.

OP - you need to post detail of the investments to get better feedback.  

masonic

Albermarle said:

talexuser said:

That's a big drop which shows some risk in your portfolio. An e.g. world tracker I have is 7% down from absolute peak of the market last November, and my funds in total between ISA 10 and general account 15% down again from absolute peak, a reflection that they improved on a tracker in the good times but may fall more in bad. The tracker will not outperform some of your choices if we enter another bull run, but with global interest rises and inflation I doubt we will have some of the gains as fast as the recent past. It is never a good idea to sell at a loss since in time things may recover, it depends how long you can wait. I would look at your maximum risk funds and maybe change some of those rather than the whole lot at one time. That would be unlikely to wipe out loses in a short time and would still need some good luck in the new choice if you expect instant improvement.

As Dunstonh pointed out in an earlier post, it could also be the portfolio is in mainly in traditional low risk gilts and bonds, which have performed unusually badly recently. In which case the losses are going to be slow to recover significantly.

OP - you need to post detail of the investments to get better feedback.  

I think we've already been given the gist of it: "basically my portfolio consists of a couple BG funds,  JPM emerging markets,  rathbone global,  a couple small cap funds,  a couple others."
I'm guessing the 'couple of others' are not bond funds, but even if they were, all of the other funds mentioned would have delivered similar results as obtained from the portfolio as a whole.

NoviceInvestor1

Linton said:

eastmidsaver said:

hi,
i have a portfolio of about 7 or 8 funds..... all of them are down.   
some are down more than others,  but i think the average loss in the portfolio is about 25% 
before the crash ii was around 10% up,  so it's been a big drop.
i am thinking of selling them all and just reinvesting into something else.
unsure if this is a wise thing to do...  or just keep holding .

I fear you are on the verge of making a common mistake ...

Your funds (A) have performed badly over the past few months, so you sell them for less than they cost, making a loss.  You buy a new set of funds(B), presumably those that have peformed well over the same time period as there would be no point in buying other funds that have also performed poorly.  But as they performed well they are relatively expensive.  In a year's time the economic climate changes and your new set of funds perform badly whereas the old funds perform better.  What do you do?

Keeping to your logic you sell B potentially at a loss and buy back A.  So your investment pot may get smaller each time the market changes direction.

A better approach is firstly to understand why portfolio A performed poorly.  It is likely that most similar funds performed in a similar way.  So it was nothing to do with the funds in particular but rather in what sort of things they invest.  You may decide that that you still want to invest in those sectors as they should recover when conditions change.

An even better approach I believe is to invest as broadly as possible so that whatever happens you get some winners and some losers but overall your total wealth should steadily increase over time as the profits made by companies throughout the world are either reinvested or returned to you as dividends.

Buy high sell low, rinse and repeat - what could possibly go wrong? 

eastmidsaver

hi, thanks for all the responses.

so why did i pick those funds?   if i am honest,  i was reasonably new to investing at the time and i guess it's the classic mistake of looking at past performances.   also in combination of the platforms providing their insights too and being sold on them. to be fair i did understand the risk levels especially in small cap ones.  and as i said  all the funds were performing very well last year,  but we all know what has since happened this year.

so why do i want to change them?   well i am not expecting to pick anything better.  i just want to keep things more simple now.with lower costs. i acknowledge mistakes were made, but i guess as with anything,  it;s about learning from them.  i think now i would just prefer to stick with the index funds (which is where my money has been going since this tax year began)

i sense the majority are saying selling at loss doesn't really make much.  i also don't necessarily need the money at moment so may just hold on to them and then periodically check.

thanks again.

JohnWinder

Rick Ferri’s education of an investor:

1. Born in darkness;

2. Finds indexing enlightenment;

3. Over-complicates everything;
4. Embraces simplicity.