Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • gif1
    • By gif1 15th May 18, 8:50 PM
    • 38Posts
    • 6Thanks
    gif1
    How do you consolidate your gains?
    • #1
    • 15th May 18, 8:50 PM
    How do you consolidate your gains? 15th May 18 at 8:50 PM
    Hi,
    Assuming that timing the market (sell high, buy low) is near to impossible, is portfolio rebalancing the only and/or best way to consolidate your (paper) gains when your holdings have been performing well and you would also want to protect yourself from the next downturn?
    Are there other options?
    If you rebalance, how frequently do you do that? I guess doing it too often might curb your gains?
    And, for this reason, do you always hold some cash in your portfolio as a risk free (safe) asset, or fixed income might suffice?
    Thank you for your answers.
Page 2
    • aroominyork
    • By aroominyork 16th May 18, 12:36 PM
    • 575 Posts
    • 190 Thanks
    aroominyork
    I think the implication was for consistently under performing funds over a period of time not the difference between 2% in one sector/region over a few months. As an example, at the moment I'm considering my holding in Fidelity Asian Values in my ISA account and whether I should switch to Invesco Asia Trust or Schroder Asia Pacific Trust. Its done well long term but I'm just not sure about whether its the right investment for me in that region in the future.
    Originally posted by StellaN
    It doesn't read like that, Stella. It reads like he takes a call each three months on whether a fund has suddenly turned into a dog.
    • cogito
    • By cogito 16th May 18, 1:21 PM
    • 3,460 Posts
    • 9,478 Thanks
    cogito
    Don't confuse yield (the proportion of the share price paid as dividends) with growth (increase in share price) or total return (the product of both). Many companies, or investment companies, with good share price growth pay little or no dividend
    Originally posted by ColdIron
    Quite. You have to look at the total return which, to me, is the only thing that matters. I'd rather invest in companies like Unilever and Diageo than Glaxo which is sustaining dividends by paying them out of borrowed money. It's yielding 6% but the shares are down 15% over 5 years. And still income fund managers are buying it.
    • bostonerimus
    • By bostonerimus 16th May 18, 1:39 PM
    • 2,118 Posts
    • 1,432 Thanks
    bostonerimus
    As opposed to reallocating money from well-managed funds into badly managed ones?
    Originally posted by jamei305
    Why would you own a poorly managed fund at all?.......well in fact the majority of people who own managed funds could describe them as poorly managed if they fail to beat their benchmark. If you use tracker funds and reallocate between broad asset classes you are just going with the cyclical nature of say bonds vs equities and really the only "management" decision is your initial ratio of equities to bonds and the trigger point for the rebalancing.
    Misanthrope in search of similar for mutual loathing
    • bostonerimus
    • By bostonerimus 16th May 18, 1:48 PM
    • 2,118 Posts
    • 1,432 Thanks
    bostonerimus
    I think the implication was for consistently under performing funds over a period of time not the difference between 2% in one sector/region over a few months. As an example, at the moment I'm considering my holding in Fidelity Asian Values in my ISA account and whether I should switch to Invesco Asia Trust or Schroder Asia Pacific Trust. Its done well long term but I'm just not sure about whether its the right investment for me in that region in the future.
    Originally posted by StellaN
    Why are you considering this change?
    Misanthrope in search of similar for mutual loathing
    • StellaN
    • By StellaN 16th May 18, 2:17 PM
    • 224 Posts
    • 79 Thanks
    StellaN
    Why are you considering this change?
    Originally posted by bostonerimus
    Well as I said it has done well for me over a period of time, however I am leaning towards a switch because I feel the large Asian technology companies will continue to perform well. FAS is more focused on value smaller companies, which is fine, so its just down to personal preference on the overall holdings sector/regions of each trust
    • bostonerimus
    • By bostonerimus 16th May 18, 3:10 PM
    • 2,118 Posts
    • 1,432 Thanks
    bostonerimus
    Well as I said it has done well for me over a period of time, however I am leaning towards a switch because I feel the large Asian technology companies will continue to perform well. FAS is more focused on value smaller companies, which is fine, so its just down to personal preference on the overall holdings sector/regions of each trust
    Originally posted by StellaN
    So this isn't really rebalancing or consolidation.....it's a change in investment strategy going from asian value/small cap towards more asian large cap. That's something I've never even thought about.
    Misanthrope in search of similar for mutual loathing
    • gif1
    • By gif1 16th May 18, 3:28 PM
    • 38 Posts
    • 6 Thanks
    gif1
    I thought that by rebalancing you are in a way forced to sell (high) some of your good holdings and to buy more in your underperformers that will automatically turn out to be chaep-ish. In a bull run the underperformers could be cash,gold, fixed interest. I was asking about gain cristallization rather than strategy changes.
    Thank you
    • bostonerimus
    • By bostonerimus 16th May 18, 3:55 PM
    • 2,118 Posts
    • 1,432 Thanks
    bostonerimus
    I thought that by rebalancing you are in a way forced to sell (high) some of your good holdings and to buy more in your underperformers that will automatically turn out to be chaep-ish. In a bull run the underperformers could be cash,gold, fixed interest. I was asking about gain cristallization rather than strategy changes.
    Thank you
    Originally posted by gif1
    That's the usual way rebalancing is thought of. As retirement gets closer people often also move away form equities to less volatile fixed income assets, the extreme being buying an annuity....that's the ultimate in consolidation.

    The momentum approach where you buy more of the good performers sounds to me like "selling low and buying high", but it's advocates will point you to research papers that show that such an "inverse rebalancing" strategy produces excellent results as more often than not previous winners will be future winners. Of course try telling that to Woodford's investors.
    Misanthrope in search of similar for mutual loathing
    • aroominyork
    • By aroominyork 16th May 18, 4:06 PM
    • 575 Posts
    • 190 Thanks
    aroominyork
    So this isn't really rebalancing or consolidation.....it's a change in investment strategy going from asian value/small cap towards more asian large cap. That's something I've never even thought about.
    Originally posted by bostonerimus
    We know you wouldn't think about it since you kindly tell us your investment strategy on a daily basis. For us active folk growth/value, small cap/large cap are issues we consider. It gives us something to worry about .
    • bostonerimus
    • By bostonerimus 16th May 18, 4:24 PM
    • 2,118 Posts
    • 1,432 Thanks
    bostonerimus
    We know you wouldn't think about it since you kindly tell us your investment strategy on a daily basis. For us active folk growth/value, small cap/large cap are issues we consider. It gives us something to worry about .
    Originally posted by aroominyork
    Yes, I can't imagine what that must be like, but more seriously it isn't really rebalancing or consolidation. To me those concepts imply a feed back loop to get back to an initial allocation between asset classes or funds which often have different amounts of risk/volatility and maybe a strategy to eventually de-risk.
    Last edited by bostonerimus; 16-05-2018 at 4:34 PM.
    Misanthrope in search of similar for mutual loathing
    • aroominyork
    • By aroominyork 16th May 18, 4:41 PM
    • 575 Posts
    • 190 Thanks
    aroominyork
    I thought that by rebalancing you are in a way forced to sell (high) some of your good holdings and to buy more in your underperformers that will automatically turn out to be chaep-ish. In a bull run the underperformers could be cash,gold, fixed interest. I was asking about gain cristallization rather than strategy changes.
    Originally posted by gif1
    Not necessarily underperformers. You expect some asset classes (and funds within classes) to outperform others so if, eg you want a 60/40 equity/bond split so in a rising market you would expect to periodically sell equities to get your bonds back to 40%. Now if only there was a type of fund that did that for you automatically...
    Last edited by aroominyork; 16-05-2018 at 4:53 PM. Reason: Added 'so in a rising market'
    • DiggerUK
    • By DiggerUK 16th May 18, 5:23 PM
    • 3,042 Posts
    • 2,989 Thanks
    DiggerUK
    ......Saying that, I am glad that I didn't do the same........
    Originally posted by Prism
    I think we are a lot older than you, 60+, so we wanted to ensure that crash or no crash we were bomb proof.
    "Glide path with gold" is not a retirement plan the usual suspects market. To be considered in the future on a need to consider basis.
    Best of fortune..._
    I am not now, nor have I ever been, a Financial Adviser.
    'Forward to the British Spring' 'Viva Wikileaks'
    • AnotherJoe
    • By AnotherJoe 16th May 18, 5:27 PM
    • 10,110 Posts
    • 11,370 Thanks
    AnotherJoe
    As opposed to reallocating money from well-managed funds into badly managed ones?
    Originally posted by jamei305
    First of all,3 months isn't long enough to know that, 3 years maybe, and secondly if for example you went into a sector, such as s Asia, it woudl be ridiculous to get out it 3 months later on the grounds that say US had risen in the meantime but Asia was down.

    This would be a classic recipe of chasing gains and losing money.
    • C_Mababejive
    • By C_Mababejive 16th May 18, 7:44 PM
    • 10,538 Posts
    • 9,473 Thanks
    C_Mababejive
    Growth companies are at historical highs pretty much all of the time. How do you know when the top is. Then, should you decide to sell and look for another company to buy how can you tell if that one will grow at a greater rate. Its difficult to judge. I leave up up to the fund managers...



    ...so if we trust the fund manager we have to assume that they have a better idea of the high point of a growth company and when its best to decrease exposure to it and move on. If you take SMT as an example i think we can safely say that they assume that Amazon, Tencent, Alibaba and Tencent are nowhere close to being finished as high growth companies. To invest in SMT you would have to agree
    Originally posted by Prism
    Thanks,,

    But if an individual share is at a 10 year historical high then surely this is screaming "sell" and capture the gains because if it then turns down and ticks over at its typical price which may be 30% less then it would take years to recoup what you might have banked by selling on the high, via dividend income?

    SMT maybe soon the managers of SMT will also decide to sell their stakes in the companies you mention because they may feel they have peaked. They will then go buy something else?

    In 2009 the NAV for SMT was about 100 pence. Now its about 490 pence.

    Where did all that extra value come from ? Is it a bubble? If i buy today and it pops, ill be left holding a decent loss...

    Leaving aside the normal up and down blips and corrections, is the trend truly always onward and upward? I guess it must be with costs and inflationary feed throughs behind it all.
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
    • Prism
    • By Prism 16th May 18, 8:40 PM
    • 425 Posts
    • 336 Thanks
    Prism
    Thanks,,

    But if an individual share is at a 10 year historical high then surely this is screaming "sell" and capture the gains because if it then turns down and ticks over at its typical price which may be 30% less then it would take years to recoup what you might have banked by selling on the high, via dividend income?
    Originally posted by C_Mababejive
    Stocks are on a 10 year high all the time. Today, many stocks in the world are at all time highs. There is no typical price for a stock - simply what its worth right now to another buyer.

    SMT maybe soon the managers of SMT will also decide to sell their stakes in the companies you mention because they may feel they have peaked. They will then go buy something else?
    They may do if they believe that the company has peaked for the time being. More likely they keep it and invest more in other areas, gradually reducing the percentage holding.

    In 2009 the NAV for SMT was about 100 pence. Now its about 490 pence.

    Where did all that extra value come from ? Is it a bubble? If i buy today and it pops, ill be left holding a decent loss...
    Ok so lets take Amazon, SMTs biggest holding. Its June 2009, just one year after the finacial crisis and its back to pretty much its all time high of $85. 3 years later in 2010 its worth $120. By June 2013 its worth $277. By 2016 $715 and today $1587. Thats where the value comes from. They have a number of other stocks in various stages of this type of growth. At what point would you sell Amazon to consolidate? Its an unknown. However i think its fair to say that its unlikely that Amazon do something to cause a 95% drop back to under $85.

    Leaving aside the normal up and down blips and corrections, is the trend truly always onward and upward? I guess it must be with costs and inflationary feed throughs behind it all.
    In general yes. Not all companies are growth companies though. Some do tend to hover about a range for many years (usually the high dividend payers) but its still hard to predict if and when they will break out and not return to that range. Unless you are seriously into reading up about the individual companies, how they operate and make money and reading all the financials, you will always be behind someone else that has. That doesn't stop many people having a point of view though. I'm sure lots of people sell a stock because they think it is too expensive - to someone else who thinks it it too cheap.
    • grey gym sock
    • By grey gym sock 16th May 18, 8:48 PM
    • 4,444 Posts
    • 3,992 Thanks
    grey gym sock
    But if an individual share is at a 10 year historical high then surely this is screaming "sell" and capture the gains because if it then turns down and ticks over at its typical price which may be 30% less then it would take years to recoup what you might have banked by selling on the high, via dividend income?
    Originally posted by C_Mababejive
    that depends. compared to 10 years ago, is the company making much higher profits, from much higher turnover, with much higher free cash flow, and paying much higher dividends? or are all those numbers about the same as 10 years ago?

    if the numbers are all about the same, then the share price may well go through up and down cycles, with no real upward trend. but if the numbers are growing, you'd expect a general upwards trend in the shares price, combined with some up and down cycles, which may translate into a share price which mostly goes up, but with occasional pull-backs.

    this does come back to inflation (as you mentioned, further down) and to economic growth. however, some companies benefit from this growth, others don't, or even shrink. and of course some benefit for a while, but circumstances change, and then they don't (e.g. think of kodak).

    however, taking all companies listed on the UK stock market - or on world stock markets - together, there has been an overall upward trend in profits (and other figures) over the last 10 years, and over longer periods.

    SMT maybe soon the managers of SMT will also decide to sell their stakes in the companies you mention because they may feel they have peaked. They will then go buy something else?

    In 2009 the NAV for SMT was about 100 pence. Now its about 490 pence.

    Where did all that extra value come from ? Is it a bubble? If i buy today and it pops, ill be left holding a decent loss...
    mostly, it is growth in profits, etc. it's probably also growth in the valuations (e.g. price/earnings ratio) of the companies SMT has held.

    they have done better than most, because they've made some good calls (without getting into whether that is skill, or taking on more risk, or luck) over that time. are those gains at risk of being reversed?

    SMT could fall very sharply in some market conditions, but that is not so much because it's gone up a lot in the past (after all: some of SMT's holdings have changed over the years), as because it now holds a rather concentrated portfolio, dominated by a few technology shares. in the short term, if market sentiment turns against those companies, SMT's NAV could fall sharply. in the longer term (and assuming SMT's managers stick to their convictions about which shares to hold), market sentiment doesn't matter so much, but if their big holdings aren't as successful (at growing profits, market shares, etc) as they hope, their NAV could also fall.

    (and since SMT is at a premium to its NAV, there is also the risk that it could fall to a discount instead.)

    Leaving aside the normal up and down blips and corrections, is the trend truly always onward and upward? I guess it must be with costs and inflationary feed throughs behind it all.
    that's right (see above). there are normal ups and downs. and superimposed on that, there is also general inflation + real growth.
    • mark13
    • By mark13 16th May 18, 9:45 PM
    • 289 Posts
    • 131 Thanks
    mark13
    buy high
    So you sell low and buy high?
    Originally posted by aroominyork

    Topping up on the winners often means buying high hoping the price may increase. It is abit bit like drip feeding. If the investment is falling back then I'd sell a percentage to liquidise some gains. I'm rubbish at buying low and selling high so I go with the trend.
    Win Dec 2009 - In the Night Garden DVD : Nov 2010 - Paultons Park Tickets :
    • mark13
    • By mark13 16th May 18, 9:57 PM
    • 289 Posts
    • 131 Thanks
    mark13
    Rebalancing
    Every three months??? So you are dealing on noise.
    Originally posted by AnotherJoe
    I'll review my holdings, if there is a particular holding that has dropped, I'll review over the longer term, if its has say dropped 10% over the year I'd jump ship or a percentage of it depending on how it had performed over a longer period. If it had gained 10% over the year, but dropped 1% in the last 3 months , I'd be keeping a closer eye on it with a view to locking in any gains
    Theres lots of factors to consider as well , such as market sentiment, wars, general market condtions, elections etc which all contribute to the decision making process.
    Win Dec 2009 - In the Night Garden DVD : Nov 2010 - Paultons Park Tickets :
    • ianthy
    • By ianthy 16th May 18, 10:41 PM
    • 123 Posts
    • 69 Thanks
    ianthy
    This is all interesting reading. My portfolio is pretty new and I have not rebalanced as yet but I want to keep things simple. With the dividends received so far I have purchased more of my core funds VSL60/HSBC Balanced etc .. the ones that are likely to be in my portfolio for a long time. For the annual review then I will possibly sell down some of the funds with bigger gains and buy more of the core funds. Maybe my approach is too simple.
    • bostonerimus
    • By bostonerimus 16th May 18, 10:55 PM
    • 2,118 Posts
    • 1,432 Thanks
    bostonerimus
    This is all interesting reading. My portfolio is pretty new and I have not rebalanced as yet but I want to keep things simple. With the dividends received so far I have purchased more of my core funds VSL60/HSBC Balanced etc .. the ones that are likely to be in my portfolio for a long time. For the annual review then I will possibly sell down some of the funds with bigger gains and buy more of the core funds. Maybe my approach is too simple.
    Originally posted by ianthy
    Your post is like mother's milk to me. Your approach isn't too simple, it sounds great to me. You have your core asset allocation dispersed over a broad range of funds that automatically rebalance. You must not be tempted to fiddle, play hunches or panic sell with the others.
    Misanthrope in search of similar for mutual loathing
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

1,339Posts Today

8,052Users online

Martin's Twitter
  • Ta ta... for now. This August, as I try and do every few yrs, I'm lucky enough to be taking a sabbatical. No work,? https://t.co/Xx4R3eLhFG

  • RT @lethalbrignull: @MartinSLewis I've been sitting here for a good while trying to decide my answer to this, feeling grateful for living i?

  • Early days but currently it's exactly 50 50 in liberality v democracy, with younger people more liberal, older more? https://t.co/YwJr4izuIj

  • Follow Martin