Minimising time out of market when switching investments

FIREmenow

Hi all,
The time has come to move my AJ Bell LISA investments into ETFs to cap the fees. There's about £16k in in HSBC FTSE All-World Index C Acc.

Is there a recommended strategy to do this to minimise time out of the market? In one go or in dribs and drabs? I know when adding new money, putting a lump sum in terms to win out over dollar cost averaging, but not sure what applies when moving existing funds.

Would appreciate your thoughts.

masonic

Presumably you are choosing an equivalent ETF (or mixture of ETFs), so there is no significant shift in how the money will be invested. The minimum time out of the market will be the time between the HSBC's valuation point and the trade confirmation when the money is available for reinvestment. Whether you switch the whole lot in one go or over several trades will make no difference to time out of the market, but the more trades you do, the more trading fees you will pay. Your best bet is to pick a date where you can reinvest the next day (i.e. don't be out of the market before a non-working day). Preferably at a time when markets are not particularly volatile.

FIREmenow

Thanks masonic,
Yes, will be going into an equivalent ETF.

Thanks for comments re: day of the week and market volatility. Would you say today (well, going through tomorrow now) would be a good time, or leave it until after Easter?

masonic

The valuation point on the HSBC fund is 12:00, so if you place the order today, it will trade tomorrow and all being well you would be able to reinvest on Thursday, but in the case of any delays there is the Easter bank holiday weekend where you'd be out of the market for quite a long time. It's possible you could get compensation for any loss if this was down to AJ Bell not acting in a timely manner. However, I'd probably opt to delay until after these bank holidays and place the order in time for Tuesday's valuation point (to allow US holdings to find their level following their 3 day weekend).

FIREmenow

Thanks masonic, that's really helpful. I'll hold my horses until after the hols.

EthicsGradient

I'd also advise waiting until after Easter; I'm not sure what AJ Bell's settlement times are on OEICs, but at ii, OEICs have a 4 day settlement period, but ETFs a 2 day period. That might mean the funds to settle the purchase of the ETF won't be available for use until the Tuesday on AJ Bell. And remember that markets such as American ones don't take Easter Monday off, so you'd be out of the market if AJ Bell didn't allow you to trade this Thursday.

FIREmenow

Thanks both, the AJ Bell help pages suggest funds 'should' be available the day after the settlement date, but I'll wait until next week.

masonic

EthicsGradient said:

I'd also advise waiting until after Easter; I'm not sure what AJ Bell's settlement times are on OEICs, but at ii, OEICs have a 4 day settlement period, but ETFs a 2 day period. That might mean the funds to settle the purchase of the ETF won't be available for use until the Tuesday on AJ Bell. And remember that markets such as American ones don't take Easter Monday off, so you'd be out of the market if AJ Bell didn't allow you to trade this Thursday.

Do AJ Bell make investors wait for settlement before sale proceeds are available to reinvest? I know this is not the case for shares/ETFs/ITs, but haven't got first hand experience with OEICs. It would single them out among the major DIY platforms as the odd one out if true.

If not, then there is still the potential issue when moving from a longer settling security to a shorter one, as at least one platform now charges interest when a purchase settles before the sale that is being used to fund it.

masonic

FIREmenow said:

Thanks both, the AJ Bell help pages suggest funds 'should' be available the day after the settlement date, but I'll wait until next week.

This page seems to contradict that:

https://www.ajbell.co.uk/faq/how-long-does-it-take-i-can-reinvest-my-sale-proceeds

Settlement date will be another 2 working days after this.

So, for example if you placed the order now, it would execute at the Wednesday valuation point and you'd get the contract note on Thursday. At that point you could reinvest. Settlement would likely be Wednesday 3rd April due to the Easter weekend for both orders.

Whereas if you placed the order before the cut-off time next Tuesday, you'd get the contract note on Wednesday and could reinvest, with settlement likely being Friday for both orders.

FIREmenow

Apologies, I was using settlement date when I meant contact note!

Notepad_Phil

FIREmenow said:

Hi all,
The time has come to move my AJ Bell LISA investments into ETFs to cap the fees. There's about £16k in in HSBC FTSE All-World Index C Acc.
...

Personally I'd be worried about a market upturn just after the sale of the All-World fund, so that the market makes a significant rise before you can hopefully make the ETF purchase the next morning. Even just a couple of percent rise between the selling and buying points would mean you'd lose out on a few hundreds of pounds (and such a rise over such a short period of time is not a rare event). Of course the markets could just as well fall, in which case you'd be better off.

It's coming up to the next tax-year, so when it arrives could you perhaps deposit next years's full max LISA amount into your account and then put in a series of sales of your HSBC and at 12:00 of each sale put in a purchase of the ETF so that you minimise as far as possible the time out of market.

Obviously this would incur additional costs and requires a lot more planning on your part, but I thought it worthwhile to mention as it's what I would do in your particular position.