Time to sell?

Voyager2002 · 20 July 2018 at 10:28AM

How do you decide which investments to sell, and when it is time to get out?

My portfolio is totally made up of equity based collective investments (ETFs; ITs and Unit Trusts). I have been rather lazy about re-balancing, and on the investments I have held for about eight years performance varies from almost +250% (US technology) to -25% (Latin America). I now need cash equivalent to about 15 per cent of the value of my portfolio; selling a bit of everything would be inefficient in terms of charges; so what is an intelligent way to decide what to prune?

westy22 · 20 July 2018 at 10:58AM

I suspect that the most intelligent way would be to work out how you would allocate your entire portfolio cash if you were investing afresh today; compare that against the allocations you currently hold; and then sell what you need to bring you closer to your ideal asset allocation.

kidmugsy · 20 July 2018 at 11:20AM

westy22 wrote: »

I suspect that the most intelligent way would be to work out how you would allocate your entire portfolio cash if you were investing afresh today; compare that against the allocations you currently hold; and then sell what you need to bring you closer to your ideal asset allocation.

That's a good suggestion, especially if the OP were to decide that his ideal allocation should exclude, say, Latin America and China. But how should he decide that?

westy22 · 20 July 2018 at 12:05PM

That's the conundrum we all face.

We can read-up all we wish, consult with others, ask for advice etc. but, at the end of the day, we, each and individually, have to nail our colours to the mast.

I guess that is why multi-asset funds, global trackers etc are so popular as we put our faith in the whole market rising over time rather than getting it wrong by choosing poor performers going forward.

Voyager2002 · 20 July 2018 at 12:39PM

westy22 wrote: »

That's the conundrum we all face.

We can read-up all we wish, consult with others, ask for advice etc. but, at the end of the day, we, each and individually, have to nail our colours to the mast.

I guess that is why multi-asset funds, global trackers etc are so popular as we put our faith in the whole market rising over time rather than getting it wrong by choosing poor performers going forward.

I tend to agree. However, since each my purchases was designed to be different from the others I already held, following that advice would probably mean selling a bit of everything.

aroominyork · 20 July 2018 at 1:28PM

Voyager2002 wrote: »

I tend to agree. However, since each my purchases was designed to be different from the others I already held, following that advice would probably mean selling a bit of everything.

I don't think you understand westy22. Say you originally invested £10k in US tech and £5k in Latin America because you wanted twice as much in the former. Your US tech is now worth £35k and your Latin America £3750. If you still want twice as much in US tech ("work out how you would allocate your entire portfolio cash if you were investing afresh today") and you need to free up £5812 (15% of the total), you want to be left with £21,960 in US tech and £10,980 in Latin America. That means selling £13,040 of US tech, keeping £5812 and investing the other £7228 in Latin America. You would not be selling "a bit of everything".

bostonerimus · 20 July 2018 at 1:51PM

Some say dump the losers, others will say take profits. I like the suggestion above to figure out the allocation you'd ideally like now and sell (and maybe transfer) what you need to get there.

One advantage of a simple portfolio of a few funds (or multi asset funds) is that it makes management easy and avoids the paralysis that often comes with complexity. I use a core 3 fund portfolio and when I was saving for retirement had a 60/40 asset allocation that I rebalanced whenever it got out of balance by +/-5%. When I needed cash I simply sold keeping my allocation at 60/40.

IanManc · 20 July 2018 at 2:25PM

Voyager2002 wrote: »

How do you decide which investments to sell, and when it is time to get out?

My portfolio is totally made up of equity based collective investments (ETFs; ITs and Unit Trusts). I have been rather lazy about re-balancing, and on the investments I have held for about eight years performance varies from almost +250% (US technology) to -25% (Latin America). I now need cash equivalent to about 15 per cent of the value of my portfolio; selling a bit of everything would be inefficient in terms of charges; so what is an intelligent way to decide what to prune?

Try working out what in your portfolio can be sold that will liberate the sum in cash which you need while not going over this year's CGT allowance, and do that.

Time to sell?

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