De-investing, when to call it quits?

Frequentlyhere

Answering afresh to this:

"What about on the way back out?    Does the same rule usually apply?"

Lots of ifs buts and maybes as already pointed out but I'd say the simple answer is yes.

If one has money in volatile assets that needs to be spent within 3-5 years, then that money needs to be taken out of volatile assets and put in something with a shorter duration and with less volatility. 

EthicsGradient

Sea_Shell said:

General hypothetical question alert.


We know that the "rule" of investing is to only invest for the longer term, which is usually for a minimum of at least 3-5 yrs.

What about on the way back out?    Does the same rule usually apply?

e.g. you have (had) an investment pot from which you NEEDED, say, £12k pa.    As it gets whittled away (as it's been drawn at an unsustainable rate), at what point do you "cash out" as a rule of thumb?

Once you have only 3-5 yrs cash equivalent worth left? (£36-£60k), or would you just keep going until the bitter end and a zero balance, once you're resigned to the fact that you know it will inevitably run out.   Maybe not today, maybe not tomorrow, but soon!

Would there come a point where an FA would make contact and tell you that you really should cash-out now, or stop making withdrawals?   Or would this be customer lead?


(Please take this at face value, ignore other income, spending, other assets etc, as this is just an example.)

On reflection, I think this hypothetical has too little information to be answered. If there's a NEED for £12k pa from this investment pot, then we have to know what happens after it's used up, whether having been invested as long as possible, all withdrawn into secure savings and used up that way, or something in between. Is the NEED to see someone through until a state pension will become available at a known time, for instance? Or is it something like "they will they have to leave their house, being unable to afford the rent, and move in with relatives", for which you might say "do whatever you can to stave it off as long as possible"?

I don't think we can "ignore other income, spending, other assets etc". We need to know if the downside of it only lasting 4 years is a lot bigger than the upside of it lasting 6 years.

badger09

@EthicsGradient
My thoughts too.
The answer to ‘what happens when the money runs out’? will surely affect the answer to Sea_Shell’s hypothetical question. 

@dunstonh
Thanks for sharing the advice you gave your 78 year old client. I’m a little younger but needed to hear that again. I’m sure I’m not alone😊

Swipe

badger09 said:

@dunstonh

Thanks for sharing the advice you gave your 78 year old client. I’m a little younger but needed to hear that again. I’m sure I’m not alone😊

I'm in a similar boat, you are not alone

Sea_Shell

Basically, when its gone, it's gone and the "beneficiary" will have to manage without.

In the current climate, that could mean great hardship. ☹️

I think I'll leave it there, as "it's complicated" and I was just trying to guesstimate what sort of balance would trigger de-investing in the scenario described.

Thanks all.

EthicsGradient

Sea_Shell said:

Basically, when its gone, it's gone and the "beneficiary" will have to manage without.

In the current climate, that could mean great hardship. ☹️

I think I'll leave it there, as "it's complicated" and I was just trying to guesstimate what sort of balance would trigger de-investing in the scenario described.

Thanks all.

So is the £12k/year figure really that fixed? They may take that much now, but the sudden transition from 12k to 0 seems extreme. Wouldn't the possibility of using a bit less each year, with the hope of staving off great hardship longer, be worth thinking about?

But if there isn't a fixed date it needs to last until, I'd say "keep it invested", as I did in my first post (if it can be somewhere without high fixed charges). It's likely to grow more in the stock market than a savings account.

Sea_Shell

£12k was an example figure.  It was about multiples, in general terms.



Sorry, I don't want this thread to get "personal" and get in to all the whys and wherefores.

I've (sort of) got my answer, so thanks all.