CGT and CGAR (wealth draining not preservation)

mears1

These wealth preservation funds were bought to  provide stability to a portion of my portfolio! But my CGT and CGAR are down -0.978% and -6.64% respectively. If anyone is experiencing this, how are you dealing with this? Has anyone with any insight, guess they will go up?

I'm waiting for them to go up and will sell when they reach my purchase price. Could this be indefinitely?

Rheumatoid

Why don't you just sit tight and let them go over your purchase price?

Albermarle

Nothing is guaranteed with investing . These funds have to make investment decisions that will provide stability in a falling market and give some long term growth, and that is not as easy as it looks.
There are four investment trusts that are associated with Wealth Preservation. These are the annualised trailing returns for one and five years.

CGT : minus  8.6% and 3.4%

Personal Assets : minus 2.5% and 4.6%

Ruffer : minus 4.6% and 4.5%

RIT : minus 20% and zero

Another well known fund claiming to give growth in all market conditions is the Standard Life Absolute Return Fund : minus 10% and minus 9.5% ( yes a 47.5% loss over 5 years )

Finally a well known medium cautious multi asset fund.

Vanguard Lifestrategy 40 - minus 2% and 2% 

So yes CGT have disappointed a bit in the last 12 months, but helps to put it in context.

masonic

I don't really understand why you want to sell them when they get back to the price you paid for them, or why you would wait for this if you want to sell. 

What are you going to buy with the proceeds? Isn't there a risk that this will rise in price faster than these WP funds?

Generally you shouldn't buy funds like this unless you are willing to hold and take at least a 5 year view.

jimjames

mears1 said:

I'm waiting for them to go up and will sell when they reach my purchase price. Could this be indefinitely?

Sell them now and you're guaranteed 4.5% pa at least from cash so you'll beat your purchase price in a couple of months for the 1% loss and 18 months for the other. Leave it where it is and who knows. I'm not sure why you'd wait if you can get a better return elsewhere or want to keep for the long term anyway.

boingy

There are some on this board that simply cannot entertain the concept of cashing in a loss and investing it elsewhere but I'm not one of them. I review all of my investments at least every couple of years and if a fund has underperformed in comparison to similar funds then it is time to dump it and reinvest the proceeds in one of those similar finds, assuming your investment strategy his still the same and that there are no exceptional circumstances for the underperformance. 

Funds that underperform tend to continue to underperform so it's better to swallow that pride and move to one that will grow faster. I've been investing for close on four decades. I've seen slumps, crashes and various "Black" days. Even when the markets are heading downwards some funds head downwards more slowly and recover more quickly. And if you are in it for the long term the number one best thing you can do is to look to minimise the fees, because they ,make a massive difference over the long term. 

It's a very human thing to want to get your money back but if the investment is underperforming the norm then moving it is a quicker way to get your money back.

aroominyork

As I'm sure you know, about 4% of the diffrence between the performance of CGT and CGAR is that CGT moved from a premium to a discount.

Theory says you should not think about what you paid for an investment but only about its current value and how you would invest that amount today if it was sitting in cash. The paper loss is water under the bridge and it is illusory to think of it as 'your money' which is biding its time until it comes back to you, its rightful owner. There are two problems with that. 

The first is that it can encourage over-trading - every day you look at the value of your portfolio and think how you would tweak it if it was all sitting in cash. But that leads you to buying high and selling low. So long as your investment objectives have not changed and the underperformers do not need to be seen in a whole new light rather than having gone through a bad patch (which all funds do), sit it out.

The second is what others have already said - why is the amount you paid for it the time you would sell? If you are waiting for it to recover say 10%, the chances are that alternative homes for your money might do the same... or better. The concept of 'get back what I paid' is a natural reaction for inexperienced investors. You need to process this and see whether you can reach a more 'professional' view of how to manage your investments.

JohnWinder

you should not think about what you paid for an investment but only about its current value and how you would invest that amount today if it was sitting in cash.’

I don’t think it’s right to try to embarrass folk to stop them ‘buying high and selling low’ as we do, but also tell them they should ‘sell low’ for something they can’t be sure is a better option.

If we were certain about what future returns would be, then sure, sell at a loss and do better with something new. But with uncertainty about the future returns of your loser and its attractive alternative, isn’t ‘I don’t sell for a loss’ a reasonable attitude?

‘If you are waiting for it to recover say 10%, the chances are that alternative homes for your money might do the same... or better.’

Or worse….

aroominyork

JohnWinder said:

I don’t think it’s right to try to embarrass folk to stop them ‘buying high and selling low’ as we do, but also tell them they should ‘sell low’ for something they can’t be sure is a better option.

If we were certain about what future returns would be, then sure, sell at a loss and do better with something new. But with uncertainty about the future returns of your loser and its attractive alternative, isn’t ‘I don’t sell for a loss’ a reasonable attitude?

I didn't say that at all. I said:

aroominyork said:

So long as your investment objectives have not changed and the underperformers do not need to be seen in a whole new light rather than having gone through a bad patch (which all funds do), sit it out.

AlanP_2

mears1 said:

These wealth preservation funds were bought to  provide stability to a portion of my portfolio! But my CGT and CGAR are down -0.978% and -6.64% respectively. If anyone is experiencing this, how are you dealing with this? Has anyone with any insight, guess they will go up?

I'm waiting for them to go up and will sell when they reach my purchase price. Could this be indefinitely?

Over what time period?

Down less than 1% over recent months is stability compared to many other options.

I've got some that drop more than that in one day.

mears1

AlanP_2 said:

mears1 said:

These wealth preservation funds were bought to  provide stability to a portion of my portfolio! But my CGT and CGAR are down -0.978% and -6.64% respectively. If anyone is experiencing this, how are you dealing with this? Has anyone with any insight, guess they will go up?

I'm waiting for them to go up and will sell when they reach my purchase price. Could this be indefinitely?

Over what time period?

Down less than 1% over recent months is stability compared to many other options.

I've got some that drop more than that in one day.

Apologies for not replying sooner.  These were bought last year - yeah, I know that's not long but they were bought to function as wealth preservers (especially since their charges are higher than trackers).

 There is a typo in my original post, the CGT should be -9.78%.

Would have done better in a bank's fixed rate bond!  As alluded to in some newspapers. Even if the bond is below inflation.