Should I cash in my investments while markets are high?

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Ask the expert at Smith & Pinching about cashing in your investments - Credit: Getty Images/iStockphoto

I’ve been growing my investment portfolio to allow me to help my children buy their first homes. My son would like to buy a home next year, but my daughter will probably wait a few years before buying. I’m worried that markets may suddenly drop just at the point when I need to take my money out. Should I take it out now and put it into my bank, while markets are reasonably high?

Jeremy Woodruff, Director and Chartered Financial Planner with Smith & Pinching

Jeremy Woodruff, Director and Chartered Financial Planner with Smith & Pinching - Credit: Smith & Pinching

Jeremy Woodruff of Smith & Pinching responds:

Investing is a long-term process and you are right that your portfolio values could fall at various stages and then hopefully recover, giving overall growth if you take a period of, say, five to 10 years. Ensuring that you consolidate the growth and mitigate the losses is part of the process of investment advice.

It makes sense to review your portfolio so that you are not vulnerable to market volatility just at the point when you need to withdraw. However, that doesn’t necessarily mean that you should cash in your investments now, but it may mean that you should lower the risk level of some of the investments in the portfolio as you approach the time that you want to make withdrawals.

All investments have a degree of risk, but it is perfectly possible to hold investments that have a low risk profile. The key is in the planning.

I strongly recommend that you sit down with an independent financial adviser from a firm of Chartered Financial Planners and work out exactly what funding you want to access and when. You can then adjust your portfolio as needed to ensure any investment risk is mitigated for the funding you need at each point.

It’s important to bear in mind that money held in the bank will only grow at a very limited rate, given the current rates of interest on offer. In real terms, if you take inflation into account, you will in fact probably lose ground.

Your financial plan is something that you should update and adjust as you and your family go through life and your circumstances change. Advice can be critical to keep your long-term plans on track.

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Any opinions expressed in this article do not constitute advice. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

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