If it’s done well, get rid of it!

I spoke at a meeting of the University of Third Age (U3A) in Cranleigh last week and we took a look at a client case study.

The case study was of a man with a very ‘equity based’ pension portfolio but he was very close to the point where he might purchase an annuity and my argument was that he should de-risk his pension funds.

The argument being that protection against the downside was more important than chasing double digit figures.

But, argued one of the attendees, one of his equity funds has done really so why not hold onto it?

This prompted me to think I wonder if we do sometimes hold onto the winners for too long?

The stockbroking sector I understand has an expression, “it’s never wrong to take a profit”.

So the fund having done well, why take a chance and hold into it until it has done less well, or even badly? Take the profits and bank them.

In the case of the client this made even more sense because in a very short time he would be buying an annuity with his funds.

Is it wrong to cash in the winners?

Well this highlights most importantly the need to make sure that all investment decisions are very closely linked to financial planning goals and objectives.

That way it is not so much about picking winners and losers as picking suitable funds that will do the job you want them to do