If you partially withdraw from a S&S ISA that's slightly down, have you lost money?

smithy15493

Hi - just wondering if you had say £10,000 in an index fund that is currently worth £9,500, and you withdraw £1000, have you taken a loss? Or because you haven't withdrawn the full amount is that £1000 still worth £1000 disregarding inflation?

t1redmonkey

I believe you need to check the price per unit you bought at, and also sold at. 

I think most likely you've made a loss and would've sold at a lower price per unit than what you bought at, but might be other factors to take into account (charges, distribution payments) so maybe not as much of a loss as might first appear.

eskbanker

In order to withdraw £1,000, you first have to sell some units of the fund, and if they're worth 5% less than the acquisition cost then yes, you've crystallised a loss of 5% of that portion of your holding, ignoring dealing/transaction costs.

smithy15493

And if you've been buying monthly across different price points, and the current fund value is higher than a few of the prices you bought at, could you think of it as withdrawing those cheaper payments and therefore not making a loss?

[Deleted User]

Hi,

if you were drip feeding you would need to work out your average purchase price compared to sell price.

Sea_Shell

smithy15493 said:

And if you've been buying monthly across different price points, and the current fund value is higher than a few of the prices you bought at, could you think of it as withdrawing those cheaper payments and therefore not making a loss?

Just what I was going to say!!

It's what I keep telling myself, anyhow! 😉

eskbanker

smithy15493 said:

And if you've been buying monthly across different price points, and the current fund value is higher than a few of the prices you bought at, could you think of it as withdrawing those cheaper payments and therefore not making a loss?

You can think of it how you like, but if the investment was outside a tax wrapper (such as ISA or pension) then you need to calculate any potential capital gains tax loss or gain and the rules for that are well-defined, under which you have to work out an weighted average unit acquisition cost against which to compare your disposal cost....

Linton

smithy15493 said:

Hi - just wondering if you had say £10,000 in an index fund that is currently worth £9,500, and you withdraw £1000, have you taken a loss? Or because you haven't withdrawn the full amount is that £1000 still worth £1000 disregarding inflation?

If you sold any of the index fund for less than you paid then you would have taken a loss at that time.  Withdrawing cash from an S&S ISA does not change whether you made a loss or not.

Beddie

You have already made a loss. Withdrawing it turns it into a realised loss. That's how I view it.

Johnjdc

In a sane world where people don't have weird hangups about "crystallising losses", you don't make a loss when you withdraw the £1000. You have already made a loss, and your choice is whether to accept that loss in return for the security of turning your money back into cash, or to gamble on making a gain in the future equivalent to, or greater than, the loss.

All you have really done is made it harder to make that gain - if you had £10k and it's now worth £9.5k, you need a gain of 5.3% to get you back to your overall starting position. If you withdraw £1000 you effectively turn those numbers into £9k and £8.5k, so you need a gain of 5.9% to get you back to par. All the way down to, say, you withdraw £9k you need to double your money on the £500 that's left.

InvesterJones

Johnjdc said:

In a sane world where people don't have weird hangups about "crystallising losses", you don't make a loss when you withdraw the £1000. You have already made a loss, and your choice is whether to accept that loss in return for the security of turning your money back into cash, or to gamble on making a gain in the future equivalent to, or greater than, the loss.

All you have really done is made it harder to make that gain - if you had £10k and it's now worth £9.5k, you need a gain of 5.3% to get you back to your overall starting position. If you withdraw £1000 you effectively turn those numbers into £9k and £8.5k, so you need a gain of 5.9% to get you back to par. All the way down to, say, you withdraw £9k you need to double your money on the £500 that's left.

Depending on what you do with the £1000 you withdraw of course.