CGT and CGAR (wealth draining not preservation)

Millyonare

I tend to stay well clear of all UK funds, investments and shares. The London stock market is pretty much a dead duck. Full of aging companies, (very) badly managed, and way too many with an outdated obsession on dividends.

CheekyMikey

Linton said:

If you are going to sell your investments on the basis of 1 bad year I suggest you don’t invest at all but stick to cash savings. A necessary requirement for successful investing is to think long term. You will get some moderately bad years but should get. more good years over say 5 years with a WP fund. Switching on the basis of the previous 12 months history is a good way to lose money as you experience the falls and crystallise your losses but miss out on the subsequent rises.

I know how to suck eggs thanks, been investing for 35 years…I have a diversified range of funds and have sat tight with some of them through lean years exactly because I do understand that equity investments can go down as well as up and when markets are generally depressed there is no point hopping onto another horse if you believe yours is as good as the others. In this instance these WP funds were bought as a defensive replacement for another poor performing fund and they haven’t lived up to what I expected, in particular CGAR…. I had hoped for at least some small positive growth. Cash savings weren’t an option 18 months ago but now they are and to continue the racing analogy, they’re a horse that’s guaranteed to place and a good option in the defensive part of my portfolio.

aroominyork

CheekyMikey said:

Albermarle said:

I’ve bitten the bullet and sold down my CGAR and and Trojan X holdings today at a 6% loss

As said by @aroominyork, Trojan X has held up pretty well, so not sure how you made a 6% loss, unless you mean that was your overall loss of the two funds?

As of today Trojan X is only 2% down over the last 12 months, flat over two years and 9% up over 3 years.

Yes, down nearly 6% across both since I bought them early last year…Trojan down 2, CGAR down 7.5. My belief remains that getting a guaranteed return of 6% over the next 12 months is a better strategy than sitting tight with either of them. If interest rates had been 6% 17 months ago I wouldn’t have considered them at all…

... though 6% outside a SIPP/ISA and before tax. Less for most people.

CheekyMikey

aroominyork said:

CheekyMikey said:

Albermarle said:

I’ve bitten the bullet and sold down my CGAR and and Trojan X holdings today at a 6% loss

As said by @aroominyork, Trojan X has held up pretty well, so not sure how you made a 6% loss, unless you mean that was your overall loss of the two funds?

As of today Trojan X is only 2% down over the last 12 months, flat over two years and 9% up over 3 years.

Yes, down nearly 6% across both since I bought them early last year…Trojan down 2, CGAR down 7.5. My belief remains that getting a guaranteed return of 6% over the next 12 months is a better strategy than sitting tight with either of them. If interest rates had been 6% 17 months ago I wouldn’t have considered them at all…

... though 6% outside a SIPP/ISA and before tax. Less for most people.

Savings accounts will be in my wife’s name who doesn’t earn enough including interest to pay tax…but yes, I take your point that for many people the net return is not 6%

Linton

phillw said:

Linton said:

A necessary requirement for successful investing is to think long term.

Another requirement is knowing when to cut your losses and to move to something with a better long term future.

If you have the powers to predict the future with better than random accuracy, of course.  But then you would not have invested in what turned out to be a temporarily poor performing fund in the first place.

Cutting losses can make sense for individual shares when fundamental analysis can suggest that the price could drop to zero. But with broadly invested funds that will never happen barring the end of the world scenarios. When choosing a fund the important factors are how the fund’s objectives and strategy match your requirements, not what the future performance will be.

To return to CGT, if your objective was maximum 1 year performance then it is difficult to see why you would choose a WP fund in the first place. But then it is impossible without mystic powers  to determine what fund would do that.

Rollinghome

There's plenty of evidence that retail investors tend to switch more than they should, often buying at the top and selling at the bottom, and as a result receive lower returns.

At the same time, it wouldn't be sensible to suggest that it's invariably wrong to cut losses regardless of the circumstances. Those might be due to changes to the investment, such as a change of personnel or company management. It could also be that the investor made a mistake or mis-judgement, including the assumption that a winning trend will continue forever. We all make them.  

Or it might be that they woke up one morning to realise that they didn't have an exceptional talent to pick one of the very few funds that out-perform a cheap tracker after all.

Mixed asset funds with no obviously suitable benchmark can be the hardest to evaluate. Which is perhaps why investors in WP funds expect too much and are often disappointed. 

So perhaps switch when you feel you must, but try not to do it too often, and if you don't have an unusual ability to pick only exceptional funds, then perhaps stick to trackers.