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When to get rid of my mutual funds
February 1, 2018
7:49 pm
SaminKalhor
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My Story:

Hey guys,

I have saved up around 92k CAD for a down payment of a Condo, but prices ramped up dramatically and I left behind! So long story short, I ended up putting it in a conservative income mutual fund (%40 of it in my tfsa) and what I have been seeing right now is everyday drops in NAV which is absolutely driving me crazy. I felt so scammed by my account manager at my bank branch that I called him and asked him to sell them all regardless of the loss! but I stopped and tried to calm down and educate myself around it. My question is when is the best time to get rid of if? I dont feel that I have the body and mind set to track the fluctuation on my so damn hardly earned money. I would really appreciate if you can help me…. I feel really really dumb..:(sf-frown

February 1, 2018
9:09 pm
User230
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SaminKalhor said
My Story:

Hey guys,

I have saved up around 92k CAD for a down payment of a Condo, but prices ramped up dramatically and I left behind! So long story short, I ended up putting it in a conservative income mutual fund (%40 of it in my tfsa) and what I have been seeing right now is everyday drops in NAV which is absolutely driving me crazy. I felt so scammed by my account manager at my bank branch that I called him and asked him to sell them all regardless of the loss! but I stopped and tried to calm down and educate myself around it. My question is when is the best time to get rid of if? I dont feel that I have the body and mind set to track the fluctuation on my so damn hardly earned money. I would really appreciate if you can help me…. I feel really really dumb..:(sf-frown  

The more you have invested. The greater the sickness.

Solution.

Invest only the money you're willing to lose completely.

February 2, 2018
12:41 am
Loonie
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I do not invest in the stock market or related mutual funds, but I feel for your situation.
I don't think it matters much when you sell, at least not at this time of year, if you are determined to do so in the short run. Some say May is a good time, but that may not prove reliable.

In truth, the best time to sell is when you are ahead, not when you are losing money. If you believe in the market (which is presumably why you bought into this), then you have to believe that eventually things will improve. So, you wait for that time. That's the theory anyway.

I am wondering how long you have held this fund and how fast it is declining. It sounds like you have not had it very long. If it's a true income fund, then that suggests you are holding dividend-producing stocks and perhaps bonds in it. In that case, the NAV is not the whole story as the dividends will add to the value of your asset even when the price dips a bit. But perhaps you have not held it long enough to see those dividends come in. As mutual funds go, I don't think this was the best choice for someone who seems more interested in capital preservation and growth than in dividends.

If you haven't lost much, perhaps you should look again at real estate and adjust your expectations. If you're in TO, for example, it is still possible to get a perfectly decent condo for just over 300K if you have a good realtor to help you, but it will not be in the downtown core and it will not be a new building with swimming pool etc. You could have done that a year ago even, when prices were higher .I know this because I know someone who did it.

So, perhaps the real question is how urgently you need to free up your money, and how long can you afford to wait for your values to improve. Also, how much have you lost?

As I said, I do not invest in these things, but, if you are still relatively young, usually what goes down will come up again, especially in a "conservative" income-producing mutual fund.

I suggest you look around again at the real estate market, find something you could theoretically afford, put in an offer conditional on financing (to protect you from an unanticipated dip in your fund before you sell). If your offer is accepted and the value of your mutual fund plus dividends is good enough, sell immediately and remove the condition. If not, withdraw your offer and wait for another opportunity.

If you can't find a condo you could possibly afford, then ask yourself when you do intend to buy. If it's going to be quite a while, perhaps you should hang on until then.

There is no ideal answer, but the truth is that most people lose money on the stock market not because their NAV went down for quite a number of days or months but because they bought high and sold low in a panic.

You're not alone. Many people have learned these things the hard way!

February 2, 2018
5:46 am
2of3aintbad
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What is the name of the fund(s) and when did you buy? Just a general comment: if you have a choice of selling something in your TFSA or open account, you need to consider the income tax consequences. If you sell at a loss in the open account, you can at least save that loss to offset gains. Not so in the TFSA.

Finally, for various reasons, I would never sell "all" of any fund in one shot.

February 2, 2018
1:45 pm
Bill
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Sounds like someone who buys a conservative income mutual fund and then tracks its price every day probably has not matched her/his temperament and/or investment objectives with the investment vehicle purchased. Learning to do that usually comes via some painful experiences, so learn from this.

February 2, 2018
4:49 pm
2of3aintbad
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With all due respect to everyone posting, the 'account manager' / salesman probably has never experienced anything other than interest rates decreasing. That makes 'conservative income' a synonym for easy money.

Nothing goes in one direction forever, and we are starting to see the effects of rising interest rates. Unfortunately, it is the inexperienced or otherwise busy investor that relies on someone else who is motivated to sell a product, even if he does not want to admit that.

February 2, 2018
6:59 pm
User230
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2of3aintbad said
With all due respect to everyone posting, the 'account manager' / salesman probably has never experienced anything other than interest rates decreasing. That makes 'conservative income' a synonym for easy money.

Nothing goes in one direction forever, and we are starting to see the effects of rising interest rates. Unfortunately, it is the inexperienced or otherwise busy investor that relies on someone else who is motivated to sell a product, even if he does not want to admit that.  

The people selling these products are not good sources for advice. Their bias is often clouding their judgment.

I'd for sure do my own research and ask other people questions on forums like this or others.

One tactic is to try and sell RRSPs or TFSAs to a person. They try to play on peoples miss understandings with half truths and semi-facts. Act like their giving good advice and their really just trying to trap someone into staying with their company.

Once a advisor said to put my RRSP into a locked in mutual fund for 50 years with no way of removing the money. Pushed that so hard. Like the only thing he would talk about.

It was the complete wrong thing to do in my situation and made no sense. The advisor didn't care. I even challenged him and he just kept going back to this over and over. Lets just say I never went back for advise from that advisor.

They are paid to retain and promote, not to understand everyone's individual financial needs. In some situations they align and it's good advise. Don't think that is always the case.

February 2, 2018
7:10 pm
Loonie
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So, we're all agreed that one should be extremely wary of "free" advice, that OP made a bad decision considering his goal (as he himself says), and that he has learned his lesson or is in the process of doing so.

Agreed, unscrupulous "advisors" have had a field day during this period of low interest rates when almost anything could be made to look more appealing to the unwary.

The fund itself may not be a bad one, as these things go. It may legitimately be a conservative income investment, but it was inappropriate for someone who wanted to use the money as a down payment was probably not at the "income" stage of life (i.e. retired), and who had zero market risk tolerance. Unfortunately, a lot of "advisors" somehow coax us to think that we might have more risk tolerance than we really do, and that it's somehow "unmanly" (or female equivalent?) to not be interested in investments with market risk.

His question, however, is about what he should do now that the fund is losing money. As far as I can tell, he still wants to buy a condo at some point with the money.

The goal, surely, is to minimize losses and to have it available when he needs it, whenever that is. His biggest risk right now is selling it at a loss, only to see the fund recover after he has taken his money out. He hasn't yet made that mistake.

February 2, 2018
7:41 pm
Trump
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Keep in mind. Often a bank "manager" is in training to move up the ranks. Often trained and brain washed by the "bank". So the bank "manager" is only doing what he/she was trained to do. The question is....what other non bank credentials did this "manager" have.

The question was...what/when is the best time to get rid of them?

Sell now? How much will you lose? Are there any back end or front end fees? What is the cost to sell including fees? Set a target to break even? Set a target to lose $xx? Ask the bank manger to set up a sell at $xx and that can be good for 2-3 months with the ability to change the sell at $xx or renew the order for another 2-3 months.

If I were do things again for my retirement (or any other type of savings) I would have NEVER bought mutual funds or stocks. I no longer own any and do GIC's only.

Disclaimer.....in the past I was 88Kanaka, Kanaka and Cranston

November 7, 2019
5:58 pm
Bud
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Dont forget to dump ur income funds before year end distribution wallop

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