Selling out of Managed Funds

I need your help in deciding what questions I should consider before selling out of managed funds.

As some of may you know, I need to withdraw approx $50K from managed funds to purchase property next year. I can withdraw all of $50 K from Navra Australia Retail, but I want to know whether I should sell some of the funds below as well, and the questions I need to ask myself before selling them. I am currently looking at unit prices of Navra to find the right timing. But want to consider selling some of the below as well.

I have:

CFS-MIF-Property($1K), Imputation($2K), Global Resources($3K), Geared Shares($5K)

CFS-FC- Colliers International Property ($4.5K)

Perpetual- Aus Shares ($1K), Geared Shares ($3K), Platinum International ($5K)

Challenger Asia $7K

I know it isn't much money to some of you and tell me to ignore my above holdings but knowing that some of them haven't performed in the last year, especially Colliers International Property and Platinum International, I am thinking that it may be better for me to sell some of them as cost of margin loan may be more than what I am to gain from them.

Comparing the unit prices, and the performance of the above funds I am especially unhappy with the performances of CFS Property, CFS Imputation, CFS-FC-Colliers International and Platinum International.

I have lost over 30% in Colliers International (bought $1.80 now $1.30) and about 10% in Platinum International (bought $1.18 now $1.07) and CFS Property and CFS Imputation has been just about even.

What my gut wants to do is, sell out of
CFS Property & Imputation (loss will be around $50-$200 total),
Perpetual Aus Shares (Full capital gains tax need to be paid)
Perpetual Geared Shares (capital gains discount available)
Perpetual Platinum International (loss will be around $500)

and keep CFS Global Resource, CFS Geared Shares, Challenger Asia as they have performed reasonably well.

My gut is reluctant to get out of Colliers International Property for some reason. Because I have lost so much money. I will have made no capital gains for this financial year. And by selling Navra units, I am likely to make capital loss, even though I am looking to sell the units purchased around same price as the current unit price.

I can afford not to sell (by selling more navra units) but I want to know if I would be better by selling any of the above holdings. (If it is any better, how better?)

What would you exactly do, what sort of calculations would you do or what questions would you ask before deciding whether to sell them?

My personal approach in this kind of situation is to sell off my worst performing funds - it is more tax efficient and limits the exposure to badly performing sectors or funds that are simply dogs.

However, the only exception I would make is if I thought that some of the funds were unlikely to see significant returns going forward (a change in the fundamentals of that market sector or region), and similarly, if some of my badly performing funds were likely to improve significantly - again due to a change in fundamentals (eg if property suddenly became hot again, I would want to hold onto the property funds ... but in your situation I doubt that will happen for a while yet).

I think I would tend to so something along the lines of what you suggested above ... sell off your dogs and then sell off only as much of Navra as you need to - and keep the funds that are likely to continue to do well.

The only other thing I would suggest being cautious with is that the CFS Geared Share fund is likely to be quite volatile in the short to medium term while the market is all over the place ... if you were looking to minimise your risk, it might be better to consider selling down some of that too (but when it comes down to it, the Asia and Global Resources funds are arguably more risky!) ... although I'd usually tend to try and keep the funds which have the best chance of good performance - which is what you are doing.

Chasing After Winners Can Turn Your Portfolio Into A Loser by Martin Krikorian, fee-only financial advisor and Lowell Sun financial columnist.

Nobody said anything about chasing winners - we're talking about funds which have already been purchased - not about choosing new funds.

Which is exactly what I suggested ... a fund which is in a hot sector will continue to do well until that sector is no longer hot ... and conversely, a sector which is not hot will not be the best performer.

so your suggesting just because one sector is hot this year, that next year it will also be hot? Hence you should sell down exposure to it and beef up the hot sector?

BT Financial Group - Ten investing truths

No ... I'm suggesting look at the fundamentals and make your own judgement.

You can't use statistics alone to justify a position - you need to understand what is driving the market and look at how you might benefit from those forces.

Buying last years winner is not been proven effective. In fact buying last years worst performer has proven to be better.

I did read this somewhere but do not recall where.

Cheers,

Simon, this is exactly what I'm trying to suggest, so as sim suggested, selling out of colliers (last years worst performer) may not be a good idea and beefing up last years winner (australian shares).

Come on guys - let's stop with the cliches and try and be a bit more constructive okay ?

Last years winner was NOT Australian shares - it was China, followed by Resources.

Last years worst performer was NOT property, it was international shares (particularly US based shares).

Are you really suggesting that Asia and Resources are NOT the sectors to be HOLDING your investments in right now ? We're not talking about new investments here - we're talking about an existing investment.

Blanket statements and aphorisms are quite meaningless without context and an understanding about what they actually mean.

Why don't you try and answer the question by the original poster ?

Sim, What you suggested to the OP is to sell down a poor performing sector (Colliers) and keep his Nava (Aust Shares) because they have done well over the last 12 months, and his Colliers fund is a dog. So what you suggested is to bail out of a poor performing sector, and stay in his good performing fund.

One could argue that property, globally property has been hammered and should not have much more to fall.. yet Australian shares are close to record highs, and could have further to fall. if things get nasty.

Looking at the market as we speak, ASX200 is down 2%, whereas the property index is down only 1%.

Plus our dollar is falling again, so we are more likely to see smaller falls in international managed funds, in the case of the OP its colliers and platinum as the falling dollar offsets the losses in OS markets.

I believe the OP should stick to his orginal asset allocation, and withdraw proportionally out of all his funds. Not just todays 'dogs'. Firesales of quality assets is not the way to make money.. best he keeps the colliers till market sentemant changes and he can get out at a profit. or use the losses of colliers to offset gains in Narva so he doesn't pay tax.