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Five reasons to sell an investment

when to sell an investmentBuy, buy is all very well but what about bye, bye? Financial firms are incredibly keen to sell us their bank accounts or investment schemes but can be tardy in letting us know when we should ditch them. In the old days, your stockbroker would have advised you when to move on but few investors now have (or are prepared to pay for) such personal attention. Mums, as usual, are left to get on with it themselves, so here’s a list of five warning signs which could be an indication that it’s time for you to get out.

1. You’ve doubled your money.
This is a great problem to have but a difficult one to resolve. Can the investment continue to do as well or is it due for a crash? If you stay in, you could make even more money. However, the bubble could burst and you lose all your gains. The answer is usually to redeem some (take profits, in the jargon) and keep the rest invested.

2. Other investors are pulling out.
There’s been a fuss this week about a large investor selling out of the the Woodford Equity Income fund. Neil Woodford, who runs it, is one of the UK’s best fund managers but he’s had a terrible year. To see such a large amount of money moving out (for whatever reason) is a major vote of no-confidence. I’m also an investor in this fund and am thinking about following suit.

3. The scheme is no longer being promoted.
You probably got into your investment because it had done brilliantly in the past or was top of the rankings. Check out the best buy tables and recommended lists. If yours isn’t there, you should have a rethink.

4. The fund manager leaves.
Nothing is more irritating than when the person who has tended your money into bearing a decent amount of fruit decides to get a new job or retire. It’s not often advertised either so you have to rely on reports in newspapers or online. Sometimes new management does equally well or better, sometimes they don’t. Give them six months to a year to make their mark. If they can’t, take your business elsewhere.

5. The money could do better somewhere else.
Over the last few years, cash accounts have paid dreadful rates of interest while the returns from shares and property have been significant. Could your money work harder? Think about what you need the money for and when. If there’s no particular goal for a good few years, you could consider moving from cash to shares, or from a weak fund to a better one. You can compare fund performance on specialist websites.

For the SMM beginner’s guide to investment, see here.

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Sunday, 21 April 2019