Unit Trust - Stick or Sell

[Zingari]

Given the current stock market high I've been asking myself whether to sell some units I placed into a PEP 25+yrs ago. It's (now) classed a high risk fund but over the last 10yrs its grown by 64% and the end of every year it's always ended in a gain. What, I think, started with a total of £11k is now worth near £70k at this weeks value (albeit highest price point was 4 Oct 2016).

When the stock market has previously reached 7,000 I'd set that in my mind as the time to sell, then I hung on and the market would inevitably drop as it's bounced around over the last 2yrs. However I'm thinking now is the watershed. Trouble is I dont actually need the cash from the units given that I diversified my portfolio mainly into fixed interest bonds after getting burnt on the millenium tech bubble vowing never to invest in stocks/shares again. That said what I do hold in tax free stocks have all done well.

I've got my eye on a small property which I can buy using the cash reserve but the highs and lows of the trust is niggling away that I should use this to fund it? The property is not intended to give me any additional income.

I've got a couple of other more stable investment trusts (Perpetual and M&G) and will hang onto these deciding whether to use to draw down to supplement my pension when I retire although my settlement leaves me in a reasonably good place and whilst I may look to work part time wont need to.

Selling the units and turning into cash savings is only going to realise me circa 1% albeit guaranteed.

Unlike most people I'm not interested in making loads of money with the exposure to risk it brings, just keeping ahead of inflation.

I think I actually need an IFA to sort all this out.

Any views?

[WindyCommon]

This doesn't have to be a binary decision. How about selling a decent chunk of your single fund holding and investing the proceeds across a handful of other funds with the idea of creating a lower risk portfolio? You could do this within your ISA and not lose the tax benefits you've enjoyed. Just a thought.

[LeoSayer]

If you didn't own that fund and had £70k in the bank would you buy that fund?

If not, then sell.

But don't give up the tax free shelter unless you know you're not going to need it agin.

[Jockman]

Sell and spend.

Don't let the tax tail wag the dog.

No pockets in shrouds.

Etc.

[Jon39]

Zingari said:

... I diversified my portfolio mainly into fixed interest bonds after getting burnt on the millenium tech bubble vowing never to invest in stocks/shares again. That said what I do hold in tax free stocks have all done well.

I need an IFA to sort all this out.

Any views?

Were you relying on financial 'experts', when you became involved with the 1999 technology dreamers?

At the time, common sense was enough to know that almost none of all those loss making new-start businesses, could be valued at more than a FTSE 100 company.

An example of the herd instinct, worth remembering for the next time.

[NickCQ]

I think the key questions are these, although they are a sensitive ones:

1. What % of your net invest-able assets (i.e. excluding main home) does the £70k represent?
2. How old are you / at what age do you intend to retire?

If #1, #2 or both are small numbers, then a 'high risk' asset class could be appropriate...

[Zingari]

NickCQ said:

I think the key questions are these, although they are a sensitive ones:

1. What % of your net invest-able assets (i.e. excluding main home) does the £70k represent?
2. How old are you / at what age do you intend to retire?

If #1, #2 or both are small numbers, then a 'high risk' asset class could be appropriate...

1. Without doing all the number probably less than 10%
2. 52 / 54 (still debating)

All good points above and tax free has a benefit. Slicing off annually to top up pension might be an idea and whilst I've held for the 'long term' there comes a point when I need to decide when that 'term' is concluded. Yep there's no pockets in shrouds but the dilemma is we don't know when the time comes

The fund is 'CIS Royal London UK Growth Trust A Inc' and has had some sizeable peaks and troughs along the way even over short periods. I think when CIS managed it themselves in the 90s it was classed as a 'turd' fund in respect of performance but having first insured my Suzuki moped with the 'man from the Co-op' I bought in when they were just branching out.

[Jon39]

Zingari said:

The fund is 'CIS Royal London UK Growth Trust A Inc' and has had some sizeable peaks and troughs along the way even over short periods. I think when CIS managed it themselves in the 90s it was classed as a 'turd' fund in respect of performance but having first insured my Suzuki moped with the 'man from the Co-op' I bought in when they were just branching out.

Out of interest Rowley, I had a quick look at your fund on the Stock Exchange website.

Over the past 10 years it has beaten the FTSE All-Share Index. That is a plus, because a considerable proportion of commercial funds do not achieve that.
The figures appear to be CIS = +63%, Market = +23%.

I notice that the amount of income paid out, is far less than the dividends shareholders would have received, and it was reduced in 2016 from the amount paid in 2015.

That 10 year period was obviously a difficult financial period following the debt boom, and it included four market down years.

My own portfolio has always coped well during every down year, so the past 10 years have been good.

I winced when I saw the CIS annual charge, but perhaps that is normal in the world of funds and unit trusts. On a £100,000 investment, it seems they would have taken away £15,000 in charges over 10 years. That puts a dent in the +63% performance. In comparison I pay an ISA capped charge of £36 per year including VAT, but to be fair, I do have to do my own administration.

Ref. your original questions.
The 100 index at 7,000 is a meaningless number to investors.
It is the future performance of the businesses that you have a stake in, that is the crucial aspect. If the profits increase steadily, then eventually the share price and dividends will also increase, even though the market average might have gone in the opposite direction.

[Zingari]

Jon, thanks for the info. I suppose it's alarming when you get a 6 monthly statement to find you've 'lost' several thousand but then somehow made it back later on down the line! Didn't realise the charges were so high as it's not something I've kept a track of and only looked the bottom line.

I've got this feeling that once Trump comes in and Brexit 'solution' takes shape there is going to be some volatility across the markets which is prompting the question of dump and run. Into what though is the issue. Although as suggested take out the profits now and re-invest in a spread of trusts albeit I'll get stung by set up charges.

At some point I will want to take an 'income' from my investments just not sure when that is or I use cash assets first?

[WindyCommon]

Zingari said:

... Although as suggested take out the profits now and re-invest in a spread of trusts albeit I'll get stung by set up charges.

Charging practices have changed since you made this investment! If you open a self-directed account with someone like Charles Stanley (my preference but others are good too) you'll be able to avoid any such setup charges. You'll likely access cheaper share classes too; both for your current holding and for any new diversifying investments you might make.

btw, the performance comparison figures quoted in an earlier post look wrong. The FTSE All-share index is capital only, and I suspect the income from your fund has been being reinvested each time a dividend has been paid. This will account for most (if not all) of the difference highlighted I'm afraid.

[Jon39]

Zingari said:

Jon, thanks for the info. I suppose it's alarming when you get a 6 monthly statement to find you've 'lost' several thousand but then somehow made it back later on down the line! Didn't realise the charges were so high as it's not something I've kept a track of and only looked the bottom line.

I've got this feeling that once Trump comes in and Brexit 'solution' takes shape there is going to be some volatility across the markets which is prompting the question of dump and run. Into what though is the issue. Although as suggested take out the profits now and re-invest in a spread of trusts albeit I'll get stung by set up charges.

At some point I will want to take an 'income' from my investments just not sure when that is or I use cash assets first?

lost several thousand
Yes, it can be worrying and if investment progresses well, it can sometimes be thousands of pounds in just one day. Three things can still ensure a good nights sleep though.
Weekly comparison with market index; knowing that you hold investments in businesses that are able to progress during recessions; have a long-term mindset and ignore the short-term activity which moves markets, but is impossible to predict.

dump and run
Selling at a top is beyond my ability (only the lucky can fluke that). A bubble can be spotted, but what is impossible, is predicting when it will 'burst'. What I have found easier, is buying into some good businesses during market crashes. The end of commerce has not happened yet, so my method has worked so far (29 years).

The obvious buying opportunities do not occur very often, but there was one last year, and it only required logic not specialist knowledge. The oil price had been running at $110 until 2014 (we all knew from fuel costs) and at that profitable level, overcapacity was gradually created. The price crashed to $30 and at that level (even if it went lower first) it was bound to rise eventually, but just when was obviously unknown. Shell is an enormous business, that has the clout to weather troubles (it has not even had to reduce their dividend for about 45 years), so was an ideal fairly low-risk purchase. The oil price recovery happened sooner than I had expecting, but the result was the Shell share price increased by 52.6% last year, plus four big quarterly dividends.

Business provides the wealth for most nations, so it is not surprising that owning shares long-term can be successful.

Best of luck.

Edited by Jon39 on Wednesday 18th January 17:21