As we turn the heating up and bunker down, the chill has spread to the UK economy. (Is that the worst clichéd opening line I’ve ever written!?!) Yes, news out today that it fell by the biggest amount since the Great Frost of 1709, an unremembered event until some equally cliché-loving PR found this on Google this morning. Gross domestic product – the measure of how much we make and spend – fell by nearly 10% in 2020. Brrrrr. Nonetheless the stock market remains seemingly undeterred and the FTSE100 marches on, taking some comfort from the 1% growth in Q4.
I have a small building project which needs funding, but my bank account is a trifle bare. So this morning, I decided to sell some investments to help pay for it and get going.
I made the painful decision to sell some of my still-soaring Scottish Mortgage investment trust. As some readers will recall I have about 25 test accounts with various providers to see what they’re like behind the scenes. We test different investments and portfolios too. For various dull reasons, I had £700 in surplus cash in one of these accounts a few years ago. So I idly decided to shove it into the Scottish Mortgage Investment Trust. Today, as I pressed sell, it was worth just over £4,000. The trust is up by 35% in about 3 months alone. Flipping Nora!
Over the years, I have taken profits from some of my better investments and amused no-one but myself by naming the things I have bought after them. I’ll enjoy the Scottish Mortgage patio when the world thaws. I’ve had the Lindsell Train handbag (Mulberry since you ask and I’m normally a John Lewis £80 kinda handbag person). And The Fever Tree holiday to Myanmar. The writer in me really wishes I could say that I bought £10,000 in Tesla shares one year ago and was now selling them to buy myself a £50,000 Model 3. But I thought they were over-priced so I didn’t DOH!
Knowing when to sell investments is the hardest thing. Perhaps counter-intuitively it is harder to sell something which has gone gangbusters than it is to sell something which has tanked.
“Hmmmm…I’ll just wait till it comes back up to what I paid for it…..and then I’ll sell”. Sound familiar anyone? I only finally dumped that bloody Woodford Patient Capital Trust a few months ago, after spending a year shouting at all those ‘experts’ who were restructuring it to let us just be PATIENT with our PATIENT CAPITAL and stop mucking it up like some annoying financial nanny! But I’m so glad I finally wrote that off in my head. I licked my wounds, put the final dribble left into an iShares Clean Energy fund and that has shot up about 30% in the last 3 months. Turning it from a catastrophic disaster zone to a mere disaster zone!
I think the moral of this story – and what I’m trying to say – is not that I’m some know-it-all who always gets it right. I make mistakes too. But it is good practice to consider your timeframes, to be aware of when you might need some cash, and to know when to take some profits. And when to call it a day and think about the opportunity cost of holding a dog.
Some investors set ‘stop loss’ limits when they buy things. And if you own more speculative things, if they do shoot up, I think taking back what you paid for something (‘the book cost’) makes sense – then any further upside is all profit and any crashes to Earth are cushioned. I really wish someone had told me this as a kid in the tech boom of 2000, gleefully watching my Sausage Software shares go up about 1,000% - and then all the way down again!
Our latest research in January with 2,000 UK adults, for our upcoming annual report on Online Investing, confirms that 9% of all investors today have been investors for less than 12 months. They have cut their teeth in a market where trendy consumer-loved tech brands have soared, the institution-bashing and beguiling bitcoin has gone nuts and the Reddit army have waged war on Wall Street. I love a rebel. And all this is fun. But if I could tell every new investor who is flushed with success to just take some profit off the table, and put it in a very boring low-cost multi-asset fund like the BlackRock MyMap, the BMO Universal MP or Vanguard LifeStrategy………and have at least one vehicle in a slightly slower and better diversified lane, I would.
As we put the finishing touches on our report, our readers help us to take the customer voice back to the industry. A growing part of our annual Best Buy award scores come from the investor ratings and reviews. Sunday is the deadline for this year’s scores before the winners are revealed in 2 weeks’ time. If you enjoy our blogs, or like what we do, and you can take the time to review your provider, that would be amazingly helpful. Our 2021 Best Buys will be shared in this blog on Friday 26th Feb if you’re looking for inspiration with less than 2 months left to use this year’s ISA/pension allowances.
Currently Moneybox, PensionBee and IG are the providers with the highest recommend scores, although if we set a minimum of 50 reviews to ensure a more representative view, it’s PensionBee, Wealthify and then Vanguard.
As I bow out this week, one of the Boring Team is leaving us for life in the travel industry. Jamie has worked on our content over the last few years and supported me with this blog. He has been the one improving my clumsier words, proofing it, sending me feedback, and pushing Send.
I remember a work trip to the very serious offices of Standard Life in Edinburgh. Let’s just say that Jamie is more creative than financial, and I had hesitantly suggested that his skin-tight leopard-print trousers might be a tad too much for a suit-infested office. On the plane, he grinned at me, and pulled up his trouser leg to reveal a pair of leopard-print socks. Love you Jamie. Thank you – we will miss you.
Have a lovely weekend all. Half-term beckons. Saddle up parents. This is going to be a lo-o-o-o-o-o-o-ng week……..