Should I sell an under-performing fund and invest the money in well performing shares?

adt123

Hello,

First off, the investments in question are in a SIPP with 20 years left to run, so they are very much long term investments. That said, I would still like it to grow as much as possible every year - hence the question. I am also a novice at this sort of thing.

The portfolio is evenly spread across a range of regions and sectors. However my UK equity fund has been stagnating for the last 2 years - pretty much 0% growth. Whereas a similar cost holding I have in a US defence firm has been going exceptionally well over this past year, currently up 400% which I'm obviously very pleased about and would like to capitalize on. So my question is should I sell the whole of the underperforming UK equity fund and invest it in the US stock that is currently on a roll? Or is that not a sensible idea due to a potential drop in the US market and the fact this is a long term investment so I should keep safe funds even if they are currently not growing?

If I did sell the fund I would also no longer have any holding in the UK sector, and I would be unlikely to create another one for a years.

In basic terms, should I sell a loser to back a winner in this particular case?

Thank you for your help!

moneytorques

You need a financial adviser!

InvesterJones

Only if you can predict the future

In the absence of doing that, imagine a scenario where you were investing from scratch. What are your decisions/reasons for going for a particular fund? Have those reasons changed now compared to when you started? If they haven't, you'll surely come to the same conclusion and invest in the same things again.

Definitely avoid making a decision based on short term performance - if something has performed well recently and is now very expensive then perhaps the future performance will not be so good, and vice versa.

El_Torro

Generally speaking selling low performing investments and putting the money in recently high performing investments is a good way to dampen your future returns. 

I am of the opinion (as are many others on this board) that investing in individual companies is high risk and over the long run not worth doing. All companies go bust eventually after all. If you really want to invest in specific sectors better do that within a managed fund that invests in various companies, thus reducing the risk. 

If you really do want to invest in specific companies you should have a good handle on what they are doing, read their financial reports as they are released, etc... That's a level of commitment I'm not willing to make when it comes to my investments. 

Labtebricolist

Just buy a low cost index fund such as VWRP and forget about it.  Over a 20 year horizon it will almost certainly do better than trying to pick winners or having someone else try for you.

Only thing to consider is that as you get closer to retirement you may want to reduce your exposure to equities and put some of it into bonds, but that sort of decision is a long way off.

dunstonh

However my UK equity fund has been stagnating for the last 2 years - pretty much 0% growth.

Can you name it, as UK equity has done well over the last 2 years?

thunderroad88

What UK equity fund can have done 0% in two years when the Ftse100 and Ftse All share have done nearly 30%? If it really has, get rid…it’s a dog

dunstonh

There are the sector averages for the three UK equity sectors over 2 years.

Linton

adt123 said:

Hello,

First off, the investments in question are in a SIPP with 20 years left to run, so they are very much long term investments. That said, I would still like it to grow as much as possible every year - hence the question. I am also a novice at this sort of thing.

The portfolio is evenly spread across a range of regions and sectors. However my UK equity fund has been stagnating for the last 2 years - pretty much 0% growth. Whereas a similar cost holding I have in a US defence firm has been going exceptionally well over this past year, currently up 400% which I'm obviously very pleased about and would like to capitalize on. So my question is should I sell the whole of the underperforming UK equity fund and invest it in the US stock that is currently on a roll? Or is that not a sensible idea due to a potential drop in the US market and the fact this is a long term investment so I should keep safe funds even if they are currently not growing?

If I did sell the fund I would also no longer have any holding in the UK sector, and I would be unlikely to create another one for a years.

In basic terms, should I sell a loser to back a winner in this particular case?

Thank you for your help!

So you sell a fund when its price is low to buy one whose price is high. Isn’t that the wrong way round?

Better to have a broad range (countries, industries, etc) of underlying shares and let the  market  do what it will.

Bostonerimus1

adt123 said:

Hello,

First off, the investments in question are in a SIPP with 20 years left to run, so they are very much long term investments. That said, I would still like it to grow as much as possible every year - hence the question. I am also a novice at this sort of thing.

The portfolio is evenly spread across a range of regions and sectors. However my UK equity fund has been stagnating for the last 2 years - pretty much 0% growth. Whereas a similar cost holding I have in a US defence firm has been going exceptionally well over this past year, currently up 400% which I'm obviously very pleased about and would like to capitalize on. So my question is should I sell the whole of the underperforming UK equity fund and invest it in the US stock that is currently on a roll? Or is that not a sensible idea due to a potential drop in the US market and the fact this is a long term investment so I should keep safe funds even if they are currently not growing?

If I did sell the fund I would also no longer have any holding in the UK sector, and I would be unlikely to create another one for a years.

In basic terms, should I sell a loser to back a winner in this particular case?

Thank you for your help!

Why didn't you ask yourself these questions before you started investing?

My main advice would be to never invest in a single company stock. Get yourself an asset allocation that has a good probability of meeting your financial goals ie the return you would like to average over the long term with the least amount of risk. Then sit back and do nothing other than maybe a bit of rebalancing or strategic asset allocation evolution as your circumstances change. I would never own the assets in your portfolio because I don't know the answers to your questions and, honestly, nobody does.

aroominyork

I'm going to take a wild guess that the OP owns Lindsell Train UK Equity. LT's funds have all had a torrid five years - who knows if they will turn a corner, but personally I do not like their tight focus on consumer brands. In any case, I disagree a little with...

InvesterJones said:

In the absence of doing that, imagine a scenario where you were investing from scratch. What are your decisions/reasons for going for a particular fund? Have those reasons changed now compared to when you started? If they haven't, you'll surely come to the same conclusion and invest in the same things again.

When the OP started, s/he had i) not yet invested in a company that had risen 400%; now might be a time to take profits rather than invest more, ii) maybe not experienced how individual funds can go nowhere in a rising market. 

My own view is there is nothing wrong with selling a poorly performing actively managed fund IF you take that as a learning and choose to move into a passive fund, but to hop from fund manager to fund manager is not a great idea.