Fundsmith again.

talexuser

The point is I have enough index trackers (now the largest part after recent years rebalancing) and wealth preservation already, and lots of dividends have been going into the preservation pots recently in both ISA and GIA because this rally can't last forever. Beyond that I'm not doing any major selling to try and time the market.

However the active "outperformance" section requires thinking just because of Fundsmith. Stuff like Ranmore and Artemis Global aren't a problem and I will let them run through any downturn until become uncompetitive. It is not a question of what else, but opinions of holders if Fundsmith can even get back to average.

The dilema is whether it is worth paying CGT. To put it in perspective Fundsmith is now even with all the historical GIA selling still around 50k with 20k of gains. So a full liquidate around 12k in tax. I know that represents a tiny fraction of the whole but we are supposed to be money saving not spending.

masonic

In my opinion, based on the information you've presented to us, you probably don't yet have enough index trackers. Peer support works very well in some scenarios, but not others. Where it does work, the first step is usually admitting that you have a problem. Where it can go very wrong is when your peers encourage you to continue on an unproductive path. In any case, I have never been a Fundsmith investor, so my opinions are unlikely to be of value to you. It has been many years since I've held the fund of a "star manager", and I am pleased to see the cult of the star manager slowly dying out.

The question of "what next" is not one you will be able to avoid, since it is intrinsic to the decision making process. You do not have the option of having these assets erased from existence (and likely wouldn't want that). You have to do something with this money, whether it is leave it in place, put it in a savings account, buy an index tracker, buy some other fashionable fund, or spend it. Until you have an alternative option locked in, then you cannot compare the prospects of selling vs not selling.

On the subject of whether it is worth paying the CGT, as discussed on the first page, the question is unanswerable. In essence you are asking for guesses about the relative future performance of this fund vs some undecided alternative. Plus guesses about whether future CGT rates and allowances will stay the same, get better, or get worse. The only advice I can offer is not to let the tax tail wag the dog. Continuing to hold an unsatisfactory investment to avoid paying tax on it is rather like continuing to hold an unsatisfactory investment to avoid crystallising a loss. Maybe you'll end up better off in the long run, maybe worse off, but you'll have a portfolio that will meet your needs.

Bostonerimus1

It might be worth slowly unwinding Fundsmith to keep within the annual CGT allowances as you seem to have soured on it. You could then move the money into one of the other active funds you own as you still seem to have some confidence in those. To avoid such dilemmas again I would assign some percentage of your portfolio to each fund and then rebalance as the allocations deviate from their target.

aroominyork

Maybe I have misread this, but why would £20k of gains mean £12k of tax?

phlebas192

https://forums.moneysavingexpert.com/discussion/comment/81958713#Comment_81958713

The dilema is whether it is worth paying CGT. To put it in perspective Fundsmith is now even with all the historical GIA selling still around 50k with 20k of gains. So a full liquidate around 12k in tax. I know that represents a tiny fraction of the whole but we are supposed to be money saving not spending.

Maybe best to think in terms of "money earning" rather than "money saving". CGT is a tax on success and therefore not something to be unthinkingly avoided. What is important is what will most likely increase your after-tax worth in the future. If paying CGT now achieves that then you should bite the bullet.

masonic

Just to further illustrate the point about tax vs future returns, a comparison with an ETF tracking a similar(ish) index to Smith's style:

On £50k switched into the ETF a year ago, you'd have made an extra £12k; switched 3 years ago, you'd have made an extra £22k.

CGT on £20k of gains disposed at today's rates would be £3.6k (BR) or £4.8k (HR), so unless you have some tax cliff-edge, this cost is low compared to the opportunity cost, assuming the fund doesn't turn around in the short term. In fact, even if you'd made the switch just 3 months ago you'd have broken even before now.

dales1

…and the tax isn't even payable until early 2028, so you can profit from it in the meantime.

talexuser

https://forums.moneysavingexpert.com/discussion/comment/81958921#Comment_81958921

Bummer, I was thinking of the 50k total, not the 20k gain. 24% = 4k8 - I'm getting old!

aroominyork

On the point of taking a CGT hit, here's a thread I recently started.

https://forums.moneysavingexpert.com/discussion/6659226/would-you-should-i-take-a-cgt-hit

talexuser

Still thinking about selling. Probably will but might wait a bit to see if we have a correction to lower the gain a few pounds but it will not make much of a difference. The remaining Fundsmith is a tiny fraction of a % of the GIA now so in the long run it will all smooth out.

I am surprised that there are not more Fundsmith holders or past sellers with opinions on the forum given the amount he still has invested even after the outflows, and the astonishing fact the some platforms still have him on hold (or even buy) notices based solely on 10 year figures now. I notice that in the last update Smith said he had underestimated just how bad a management could be discussing one of his worst performing stocks. I thought that argument could just as well apply to stock pickers! The other side of the coin is the Pereptual High Income history. Woodford was criticised for not joining the dotcom boom in the late 90s and sticking to his boring eg tobacco stuff before the boom, and then came out smiling the other side after the crash settled as a top performer. If we have a tech crash tomorrow maybe Fundsmith will stabilise ahead? 😁