Disinvestment strategy

[Snoopy]

But if no particular interest then yes sell 2/3 now, 1/3 managed funds now. I say this ratio because despite a bad quarter equities still aren't cheap historically and its not a time to be over weighted with risk from equities or low yielding bonds though you still have some. Retain one third cash from the sales to add to the managed fund over time (quite a long time) and in particular if prices fall.

Selling shares to buy into a managed fund is really selling one kind of equities to buy into another (or bonds to buy another if a bond fund). DAF opened this thread to discuss a disinvestment strategy for a share and bond portfolio. But if DAF is taking individual shares and bonds and putting those into managed funds (for some of the capital at least) then this isn't rally disinvestment. It is redistributing assets and externalizing management of those assets.

On rethinking this overnight, perhaps splitting what assets you have into 'three equal boxes' (for example) and doing the disinvestment in stages is not so important? Where a disinvestment strategy is more important is when you are taking assets from one asset class and reinvesting into another. In that case the values of the investment class you are taking assets from and the value of the asset class you are moving assets to are not correlated. So timing is important, and spreading the transactions over a time period, to avoid distortion by a single market peak or trough, makes sense.

Leaving the disinvestment question aside, the net meaning behind your post Peat, is that equities are not cheap historically so you should not be overexposed to them, with either individual shares or funds. But aren't the high share markets really just a product of low interest rates? And while share markets and bonds will undoubtedly suffer losses should interest rates rise, there are powerful government forces out there not wanting economies to be derailed. IMO these overvalued markets and low interest rates could persist for years. And while I agree with you that having some cash on hand to take advantage of market opportunities is a good idea, having 1/3 of all your assets in cash, earning virtually no return, might be taking things too far?

SNOOPY

[DAF]

DAF opened this thread to discuss a disinvestment strategy for a share and bond portfolio.

Actually I opened this in this thread to discuss where to get advice on a disinvestment strategy, rather than the strategy itself!

Having said that, I appreciate all the comments...given me plenty of material to take into a discussion with an adviser when I find one.

[peat]

Selling shares to buy into a managed fund is really selling one kind of equities to buy into another (or bonds to buy another if a bond fund). DAF opened this thread to discuss a disinvestment strategy for a share and bond portfolio. But if DAF is taking individual shares and bonds and putting those into managed funds (for some of the capital at least) then this isn't rally disinvestment. It is redistributing assets and externalizing management of those assets.

On rethinking this overnight, perhaps splitting what assets you have into 'three equal boxes' (for example) and doing the disinvestment in stages is not so important? Where a disinvestment strategy is more important is when you are taking assets from one asset class and reinvesting into another. In that case the values of the investment class you are taking assets from and the value of the asset class you are moving assets to are not correlated. So timing is important, and spreading the transactions over a time period, to avoid distortion by a single market peak or trough, makes sense.

Leaving the disinvestment question aside, the net meaning behind your post Peat, is that equities are not cheap historically so you should not be overexposed to them, with either individual shares or funds. But aren't the high share markets really just a product of low interest rates? And while share markets and bonds will undoubtedly suffer losses should interest rates rise, there are powerful government forces out there not wanting economies to be derailed. IMO these overvalued markets and low interest rates could persist for years. And while I agree with you that having some cash on hand to take advantage of market opportunities is a good idea, having 1/3 of all your assets in cash, earning virtually no return, might be taking things too far?

SNOOPY

I agree that it now appears DAF is not dis-investing quite so much as we previously thought and hence I increased the sell proportion to 2/3 knowing that half of that (1/3) would be going straight back into equities (mutual fund,EFT etc) But I couldnt find out who would take the shares and swap for units. That of course would be efficient from a commission point of view. So I think we agree on that Snoopy.

But I am comfortable with my asset allocation perspective (1/3 in cash or S/T TD's) which you however are surprised at. I'm sure we can agree to disagree - I accept that I have a conservative view on liquid assets. Interest rates are low but with a little bit of jiggery around the 2-3 months duration 3% can be achieved so its not 'virtually no return' as you say.

Of course to do this exercise properly would require a risk assessment of the Original Poster and consideration taken of the outcome of that. That's what a paid financial advisor would do, and then provide personalised advice accordingly.

[Snoopy]

But I couldnt find out who would take the shares and swap for units. That of course would be efficient from a commission point of view. So I think we agree on that Snoopy.

I have racked my brain to try and remember who it was that was taking shares for units. The example was some time ago. It would obviously be an 'open ended fund' and probably, a fund that did enough trading to get a good deal on transactions in bulk. It may have been with Doug in the "Money Managers" days, or AMP? But of course in those days, commissions tended to be higher. So accepting shares as payment would still have left plenty of margin for the operator, if they wished to sell them!

But I am comfortable with my asset allocation perspective (1/3 in cash or S/T TD's) which you however are surprised at. I'm sure we can agree to disagree - I accept that I have a conservative view on liquid assets. Interest rates are low but with a little bit of jiggery around the 2-3 months duration 3% can be achieved so its not 'virtually no return' as you say.

2-3 months is certainly short term, but 'cash' I take to mean 'on call'. I think about 2.5% is the best you might get for 'cash'. But I don't think a provider that offered 2.5% would have an 'A' in their credit rating! But yes I accept putting some money away for 2-3 months might be sensible while you 'buy time'.

SNOOPY