Is it worth rebalancing my portfolio?

_pete_

Thanks for all the comments.  The funds are held in a SIPP hosted by A J Bell.  The charge would be £1.50 per deal.

What I'm struggling with is that I am under the impression that there is a difference between the 'buy' and 'sell' price of a fund.  Does this mean that if I will effectively lose £££ just through the process of buying and selling, irrespective of the (trivial) deal charge?

InvesterJones

_pete_ said:

Thanks for all the comments.  The funds are held in a SIPP hosted by A J Bell.  The charge would be £1.50 per deal.

What I'm struggling with is that I am under the impression that there is a difference between the 'buy' and 'sell' price of a fund.  Does this mean that if I will effectively lose £££ just through the process of buying and selling, irrespective of the (trivial) deal charge?

There is no difference between buying and selling those funds.

ColdIron

_pete_ said:

What I'm struggling with is that I am under the impression that there is a difference between the 'buy' and 'sell' price of a fund.  Does this mean that if I will effectively lose £££ just through the process of buying and selling, irrespective of the (trivial) deal charge?

Exchange traded products (ETFs, Investment Trusts, shares etc) and old fashioned Unit Trusts have a spread, a buy/sell price

Your funds are OEICs and are single priced so there is no leakage due to the trade alone

Eyeful

_pete_ said:

I have a SIPP made up of two funds.

28% is in HSBC Global Strategy Balanced C Acc
72% is in Vanguard LifeStrategy 60% Equity A Acc

Ideally I'd like my portfolio to be split equally between the two funds.

How an I calculate how much it would cost me to rebalance so that it's 50/50?

Thank you

Just curious, as both funds are similar, why did you not stick all the money into say the HSBC Global Strategy Fund?
You would not need to worry about rebalancing then.

Notepad_Phil

I believe the two funds have slightly differing pricing times, so depending on market conditions you will find that the market has risen or fallen (even if only by a small amount) during that period if you are able to buy and sell on the same day, so you may lose or gain because of that.

And if you have to sell one fund to make the cash available to buy the other, then I would think that you'll likely be out of the market for at least a day so I'd try to make sure that you don't cross over a weekend i.e. sale goes through on a Friday but the purchase is then delayed to the next Monday (at least) - just think of some of the recent markets rises and falls caused by a late night white house announcement.

Hoenir

Notepad_Phil said:

I believe the two funds have slightly differing pricing times, so depending on market conditions you will find that the market has risen or fallen (even if only by a small amount) during that period if you are able to buy and sell on the same day, so you may lose or gain because of that.

The majority of the overseas markets will be closed at the time the calculation is made in the UK. 

GeoffTF

ColdIron said:

Your funds are OEICs and are single priced so there is no leakage due to the trade alone

That is misleading. OEICs are single priced, but they do not necessarily trade at net asset value. If they did, the cost of creating and redeeming units would be born by the long term investors in the fund. OEICs typically try to avoid that by using swing pricing. If on a particular day, the fund management company has to create more units than it redeems, the cost of doing that is recovered by making the single price more than the net asset value. If on a particular day, the fund management company has to redeem more units than it creates, the cost of doing that is recovered by making the single price less than the net asset value.

There is therefore potential leakage due to trade alone. We cannot predict the size of the hit in advance, nor whether it will be in our favour or against us. Vanguard does not publish historical numbers AFAIK. Vanguard does not use swing pricing in the US, and did not do so initially when it came to Europe. Vanguard used dilution levies instead. The dilution levies were paid into the fund. Vanguard gave up on that in Europe because they found it difficult to convince potential investors that the dilution levy was not a fee, and because most European platforms did not support dual pricing. Vanguard was reportedly very unhappy about that. Dual pricing is a much more transparent way of ensuring that traders do not dilute the fund to the detriment of long term holders.

The costs of trading ETFs are more transparent. Nonetheless, the discount or premium to net asset value is reported only once a day. Retail investors will not have that information in real time.

_pete_

Eyeful said:

_pete_ said:

I have a SIPP made up of two funds.

28% is in HSBC Global Strategy Balanced C Acc
72% is in Vanguard LifeStrategy 60% Equity A Acc

Ideally I'd like my portfolio to be split equally between the two funds.

How an I calculate how much it would cost me to rebalance so that it's 50/50?

Thank you

Just curious, as both funds are similar, why did you not stick all the money into say the HSBC Global Strategy Fund?
You would not need to worry about rebalancing then.

It's my, not very well founded I admit, disinclination to put all my eggs in one basket.  Until recently I split my SIPP across IWEB and A J Bell for similar reasons. 

_pete_

Thanks very much to everyone for all the advice and comments.  I now understand my situation better as a result.