Investment funds - cash in or stick it out?

heisenberg

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I recently invested in an investment fund with a modest amount of money. It was my first time investing, and I thought that doing it through a bank would be a good way to start of, letting someone else take care of the management and lesser risk than investing on my own.

However, as the markets are now on a downward trend, I have lost about 7% of the value of my investment. I was hoping to stick it out and wait for a recovery, but it's not looking likely at the moment.

I do not intend on using this money anytime soon (I had considered it as perhaps a 5 year investment), but I fear that I will not achieve a good return by this time unless there is a complete market turn around.

What is the general consensus? I know it is all speculative, but is it wise to stay in an investment fund until it regains its feet or bite the bullet and take the 7% loss (plus management fees)?

Any advice would be really appreciated. Thanks.
 
If it's a 5 year investment, and you don't need the money, you should probably let it run.

Any gain from today's value back to the original investment value, will be free of tax.

To explain what this means, let's say you invested €10,000 and cash it now and get €9,000. If you invest the €9,000 in shares and they rise in value the rise will be subject to Capital Gains Tax. But if you stay in the fund and it increases to €10,000 it won't be subject to any tax.

Brendan
 
I would agree unless it is a fund very concentrated on one sector. If it is any consolation I am having a pretty bad year myself. Im down about 20% in US dollar terms over the last year, I had alot of oil and mining in my portfolio which have been decimated. The saving grace is the falling euro which has me about even in euro terms. But because of the type of shares I bought Im suffering much more than the general market. I think that with computer trading and hedge funds the swings in the market are more severe now than they would have been back in the 90s. It is so east now to pull vast sums of money in and out of the markets. The average investor cannot play this game it is probably best to ignore the news and just sit it out.
 
However, as the markets are now on a downward trend, I have lost about 7% of the value of my investment. I was hoping to stick it out and wait for a recovery, but it's not looking likely at the moment.

It is pretty hard to give an opinion on some unknown investment that you have made... Honestly, if you don't understand your investment, then you should get out - not because there is necessarily anything wrong with the fund, but if you don't know what you are doing then in such situations you are more likely to loose money than make money. You're asking if you should get out, but what about the flip side - is it now a better investing opportunity than it was when you got in and should you not be doubling up? You can't answer these kinds questions unless you fully understand what you are investing in.
 
It's all about risk/reward , investing in shares historically returns more than leaving your money in the bank , but it's not going to be a straight line upwards.

Unless you have loads of time on your hands to value each individual company I find it's easier to believe in market efficiency , so buying a low cost index tracker with tight spreads and cheap transaction fees is the best most of us can do.

Even with a diversified portfolio we can still lose a lot of money , stock markets crash and nobody knows when it will happen , there are "experts" predicting rises and falls all the time they haven't really got a clue mine and your guess is as good as theirs. Before I pushed my money into stock market I had planned to put 100k in so I imagined I put that 100k in and it was worth 60k tomorrow and how I would feel- it wouldn't be nice but I could live with it so I put the money in , if I couldn't live with it I would have left money in bank , before you make any investment I think you should think to yourself - how would I feel if I lost half of this ? And be honest with yourself . Selling your investments when they fall strikes me as a very bad move as Brendan quite rightly points out your gains are now tax free.
 
If it's a 5 year investment, and you don't need the money, you should probably let it run.

Any gain from today's value back to the original investment value, will be free of tax.

To explain what this means, let's say you invested €10,000 and cash it now and get €9,000. If you invest the €9,000 in shares and they rise in value the rise will be subject to Capital Gains Tax. But if you stay in the fund and it increases to €10,000 it won't be subject to any tax.

Brendan

But wouldnt the op be able to offset any losses on this investment against future gains anyways?
 
Markets go up and markets go down. If they only went one way, there would be no risk and therefore no return.

Markets have trebled in value since they bottomed out in March 2009. Corporate earnings haven't increased by the same rate so there was always going to be some sort of correction.

Remember, you took a 5 year investment term, not a 5 month one. There will be ups and downs throughout that period. You are better off to just review your investment once a year and leave it at that. You should have had the potential downsides explained to you before you invested your money, but the banks think of commission first, clients second.


...if you went with a bank, you will probably find there are early exit penalties if you take your money out in the first 5 years. You will probably have a 5% penalty if it was recent enough.


Steven
www.bluewaterfp.ie
 
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