Vanguard Lifestrategy - should I cash in my "gain"?

2

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  • Eco_Miser
    Eco_Miser Posts: 4,708 Forumite
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    edited 9 January 2018 at 3:42AM
    Murmansk wrote: »
    It's been suggested to me that I should withdraw £4,000 in cash in case the market drops so that at least I'll not have lost that gain.
    That's dodgy maths.
    Assume you started with 100k, fund went up by 4% giving 4k profit, then fund went down by 3.846%, giving 4k loss, leaving you with exactly the 100k you started with.
    Or you started with 100k, fund went up by 4% giving 4k profit, you took the profit, then fund went down by 3.846%, giving 3846 loss, leaving you with 96154 in the fund, plus the 4000 you withdrew = 100154, 154 more than you started with.
    So withdrawing 4k preserves 154, not the whole 4000.
    Meanwhile, what happened with that 4k cash?
    Eco Miser
    Saving money for well over half a century
  • ColdIron
    ColdIron Posts: 9,045 Forumite
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    You say you are "committed to long term investing" and yet after only eleven weeks or so you are thinking of cashing in your gain

    Can you see the obvious problem here?
  • Murmansk
    Murmansk Posts: 929 Forumite
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    Eco_Miser wrote: »
    That's dodgy maths.
    Assume you started with 100k, fund went up by 4% giving 4k profit, then fund went down by 3.846%, giving 4k loss, leaving you with exactly the 100k you started with.
    Or you started with 100k, fund went up by 4% giving 4k profit, you took the profit, then fund went down by 3.846%, giving 3846 loss, leaving you with 96154 in the fund, plus the 4000 you withdrew = 100154, 154 more than you started with.
    So withdrawing 4k preserves 154, not the whole 4000.
    Meanwhile, what happened with that 4k cash?

    Thanks for those replies, and particularly the one above which does a good job of explaining precisely why cashing in £4K is not worth doing.
  • Murmansk
    Murmansk Posts: 929 Forumite
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    ColdIron wrote: »
    You say you are "committed to long term investing" and yet after only eleven weeks or so you are thinking of cashing in your gain

    Can you see the obvious problem here?

    I was not particularly thinking of cashing in my gain but seeking a reasoned argument for for NOT doing so as I couldn't think of a counter argument to the suggestion that had been put to me but the cold maths in Eco Miser's calculation is very helpful.
  • Murmansk
    Murmansk Posts: 929 Forumite
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    eskbanker wrote: »
    I think it's worth ignoring anyone who offers advice about investments that includes any reference to 'interest'!

    If you withdrew £4K, what would you do with it that seems better than leaving it to grow as per when you originally decided to adopt a long-term investment strategy?

    I appreciate the word "interest" was not well chosen but the word "compounding" was what I was talking about - maybe I should have said "compounding of gains"
  • seacaitch
    seacaitch Posts: 272 Forumite
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    Murmansk wrote: »
    I'm relatively new to investing but I've done a lot of background reading

    - If you bought your VLS in October as a "4 month gamble", then congratulations on your good luck - you've won 4 grand! Nice punt, what will you blow your winnings on? Be sure to enjoy them as gambling is a negative-sum gain for the punters...

    - If instead you bought your VLS holding as an investment with an intended time horizon of 20, 30, 40, etc years, then the answer to your "cash it in" question is very different.


    So why exactly did you buy your VLS?
    ie. what's your strategy?

    Murmansk wrote: »
    It's been suggested to me

    Tell us more about this person - is this someone experienced in gambling or someone experienced in personal financial planning and long term investment strategies? Or something else?
  • Fatbritabroad
    Fatbritabroad Posts: 573 Forumite
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    Murmansk wrote: »
    >>How do you think you'd feel if in a few months' time markets fall and it drops £4K in value?<<

    I'd think it would have been good if I'd taken out the £4K BUT as I am committed to long term investing I'd think that in due course (possibly a number of years) my investment would grow and the growth would be bigger than if I'd taken out that £4K

    I'll post this again. my lightbulb moment on this (and yes I feel like a right idiot that it has taken me until 34 to realise this) is think of your s and s isa exactly the same as your pension. Assuming you pay into a workplace pension you probably dont even look at this year to year and whether it goes up or down you don't cash it out everytime the market drops. So why would you do anything different with your s and s isa
  • Fatbritabroad
    Fatbritabroad Posts: 573 Forumite
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    Especially as I work for a financial service company :mad::p
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    edited 9 January 2018 at 2:55PM
    NO!!! You need to leave your 4k gain invested to compound. Trying to time the market is not a good strategy for the vast majority of people and you will become frustrated and probably lose lots of money. It's the classic mistake.

    Your VLS fund (you never said which one) will have already cashed in your gains and used them to buy other shares to keep it's stated allocation stable. You should reassess your goals and tolerance for risk if you are uncertain or worried what to do with a 4k gain after such a short time.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • Alexland
    Alexland Posts: 9,653 Forumite
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    ColdIron wrote: »
    You say you are "committed to long term investing" and yet after only eleven weeks or so you are thinking of cashing in your gain. Can you see the obvious problem here?

    I was once at a casino for a stag do and won big within the first 15 mins. I was sober enough to realise there was no point continuing so it kinda ruined the night for me.

    Alex
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