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

Eyeful

adt123:
Your post sounds like you are new to investing. Before you sell anything, I suggest you read the following notes.

1. Any money needed within 5 years should be in a Bank/Building Society account
covered by the FSCS up to £85K.


2. Use tax shelters where possible  (a) Pensions (b) ISA's


3. INVESTING means putting your money at risk.
You hope to get more out than you put in, but this this not guaranteed


4. Think of investing in the stock markets as a game.
Long term (say at least 10 years) i odds of winning = HIGH.
Short term (say few days/weeks) " odds of winning = small


5. You can make investing as simple or as complicated as you like.


   The Simple method of investing boils down to this:


(a) Low Cost Multi Asset Funds (for Cautious types & those that want more Control)     A ready made portfolio, where you pick the share/bond split, you are most comfortable with.Example:  https://www.hsbc.co.uk/investments/products/hsbc-global-strategy-portfolios/#balanced


(b)  Low Cost Passive Global Index Tracking Fund or ETF (for the Adventurous with a very long time frame) 
     Here its shares = 100%. It may produce the highest return but is the most risky.Example: https://www.trustnet.com/factsheets/o/kldq/hsbc-ftse-all-world-index

6.  Academic research repeatedly shows that most "active fund managers" after charges are applied,    do not beat a MAJOR  GLOBAL WORLD INDEX. 



 7. SIMPLE INVESTING IN DETAIL (advantages, easy to understand  & implement).(a) First watch this: https://www.kroijer.com/(b) Then read these     https://monevator.com/passive-fund-of-funds-the-rivals/     https://monevator.com/best-global-tracker-funds/

InvesterJones

aroominyork said:

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.

Yeah I agree - I think the point is you have learned something before making a change - or to flip it around you could say now is the time to stop, research and fully understand why what has happened, happened, and examine your own understanding in chosing those funds and in particular, your tolerance for risk. And only when you understand those things, make your choice of investments going forward, otherwise you'll just do the same again (or perhaps worse, chose another set of funds which then perform badly compared to your expectations).

adt123

Thanks for the all advice everyone, very useful to get a broad idea of the pros and cons. I am certainly new to this, as although I've had the SIPP for 10 years it's only really just got to the level that I can start attempting some active management. It's just hard to see a fund go nowhere while all the others, in particular the US stock I mentioned, are performing so well. But I can see that there is a safety element to not ditching a safe fund for the long term, despite poor performance currently.

And yes @aroominyork spot on - it is Lindsell Train UK Equity! While the rest of the portfolio seems to be going strong, its 2 year average growth is around 3%, which is pitiful compared to the double digit growth figures for the other funds over the same period.

Now that you all know the actual fund, does that change anyone's opinion on whether it should be ditched in favour of a better performer?

El_Torro

Taking a quick look at Lindsell Train UK Equity the accumulation version of the fund has grown about 15% in the last 5 years. Compares poorly with Vanguard's FTSE UK All Share Index which has grown about 80% over the same time period. 

Personally I would put all your money either in a global tracker or a multi asset fund with a suitable percentage of bonds. If you don't want to do that I would at least replace Lindsell Train with a UK tracker.

Notepad_Phil

adt123 said:

...
Now that you all know the actual fund, does that change anyone's opinion on whether it should be ditched in favour of a better performer?

Personally, the only reason I would ditch any fund would be if the new fund better fitted my investment aims, it certainly wouldn't just be because it had provided better performance over the recent past. So if you were planning to buy something like the HSBC FTSE All World Index fund because you had seen the positives of a globally diverse 100% equity fund and could deal with the sometimes large drops, or even something less full on like a 60/40 multi asset global fund, then personally I'd see a valid reason for switching, however if you were planning to buy a fund purely because it had a very good performance over the last few years then you could fall into the trap that you may have fallen into when you chose the Lindsell fund.

Eyeful

1. Your investments should not cause you to worry  or lose sleep at night. If they do, your risk level is set too high.

2. The investment industry loves people like you,
You see your investment not doing well over a short period of time (2 years, in your case) so you fell the need to jump to another fund. This generates yet more profits for the industry and makes sure you will underperform the the market index in over the long term. Its well known and documented.

3. Do not expert to shoots the lights, out. you never will. Be happy if your fund choice is in the top quartile of funds.

4. I still think that over the long term you will do best by keeping it simple. 
(a) watch this: https://www.kroijer.com/
(b) read these:
https://monevator.com/passive-fund-of-funds-the-rivals/
https://monevator.com/best-global-tracker-funds/

5.  Look at your funds every year.4 months. Maybe less.

dunstonh

adt123 said:

Thanks for the all advice everyone, very useful to get a broad idea of the pros and cons. I am certainly new to this, as although I've had the SIPP for 10 years it's only really just got to the level that I can start attempting some active management. It's just hard to see a fund go nowhere while all the others, in particular the US stock I mentioned, are performing so well. But I can see that there is a safety element to not ditching a safe fund for the long term, despite poor performance currently.

And yes @aroominyork spot on - it is Lindsell Train UK Equity! While the rest of the portfolio seems to be going strong, its 2 year average growth is around 3%, which is pitiful compared to the double digit growth figures for the other funds over the same period.

Now that you all know the actual fund, does that change anyone's opinion on whether it should be ditched in favour of a better performer?

The fund could be a useful satellite fund if you felt it offered something that a core fund could not.   However, with most portfolios running light on UK equities, there isn't much to allocate to both a core and satellite fund.

 It's just hard to see a fund go nowhere while all the others, in particular the US stock I mentioned, are performing so well.

In the first decade of this millennium, it was the other way around.     These things cycle.   The worst thing is to be 100% in one thing as it enters its poor period.  Often happens after a good run.

aroominyork

Since I pinpointed the OP's fund I guess I should say a word, but really just to expand on what I said earlier. When I started DIYing about eight years ago I went 100% into active funds. I sold my last three active funds this year after all of them had poorish runs, moving the money into passive funds. I would not recommend selling an active fund after a bad run and picking another active fund because you will probably choose a fund that has had a good run and, like dunstonh said, it often then has a bad run. If you feel the experience has taught you how to beat the market, then good luck - but many on this forum have the T-shirt reading "Well, that didn't work out so well". So my view is to chalk it up to experience - which rarely comes free to any of us - and move your UK allocation into an All Share or FTSE350 tracker. 

Bostonerimus1

adt123 said:

Thanks for the all advice everyone, very useful to get a broad idea of the pros and cons. I am certainly new to this, as although I've had the SIPP for 10 years it's only really just got to the level that I can start attempting some active management. It's just hard to see a fund go nowhere while all the others, in particular the US stock I mentioned, are performing so well. But I can see that there is a safety element to not ditching a safe fund for the long term, despite poor performance currently.

And yes @aroominyork spot on - it is Lindsell Train UK Equity! While the rest of the portfolio seems to be going strong, its 2 year average growth is around 3%, which is pitiful compared to the double digit growth figures for the other funds over the same period.

Now that you all know the actual fund, does that change anyone's opinion on whether it should be ditched in favour of a better performer?

Part of your problem is your "attempting some active management". You have an asset allocation that has probably not had much thought behind it and that has left you in a position where you don't know what to do and have some decision paralysis. You need to understand the basic statistics of investment markets, get your asset allocation sorted for the long term and then let them grow over the long term. Simply looking for a "better performer" is likely to get you into trouble again as that was Lindsell Train UK Equity before. I would sell all of your single stock investments and then invest in a simple index tracker portfolio or in multi-asset funds that will take a lot of the decision stress from your finances.