In this post, you'll find the answers to a couple of questions I was asked during the Planning with Purpose Q&A episode.
Should you ever sell at a loss?
The listener who asked this question gave some additional information to put this into context: If you have an investment that went down and then seems to stay down, should you ever sell it?
I think that if you have an investment like this, it’s likely to have been a very focused investment like a single-company share, or a single-sector fund. I’ve had clients who invested in technology funds prior to 2000 (before my time), and who saw that fund drop by 90% when the tech market crashed. Eventually, they got fed up of waiting for the fund to get back to the purchase price.
After all, a 90% drop in value takes a 1000% return to get back to where it was. You might be waiting a while, and it might never happen. I do think there are occasions where it makes sense to cut and run. If you sell and buy something else and that investment subsequently surges, you’ll be cross, but I don’t reckon that’ll happen.
If something is stubbornly and significantly below the price you paid for it for a long time, then eventually you’ll want that money doing something for you so just sell out when it feels right. But do be patient. If it’s a widely volatile holding, like a gold ETF, which can rise and fall 30% in a few days, the price will likely rise eventually.
But if it’s a faddy share or a tip you got from a mate down the pub, give yourself a slap on the wrist for investing like an idiot, resolve to learn the lesson of your mistake and get the money back to work in something decent.
Should I fix my mortgage?
If you’re about to remortgage, do you go for a five-year fix? Or longer? What might interest rates do? Should you wait for the next meeting of the Monetary Policy Committee to see what happens there?
Mortgage rates have been low for ages and there are some very good fixed rate mortgages around. For what it’s worth, I fixed mine for five years about 18 months ago now, so I could force overpayments and have my mortgage paid off by age 50. I would do so again, but consider your own circumstances.
If you’re worried about fixing for a long time, then go for a shorter fix. I really wouldn’t overthink this stuff – in the grand scheme of things, whether you fix for two years or three or five isn’t going to make a huge difference. Usually there are fees to pay every time you fix, so by doing it over five years you won’t incur any more mortgage costs for five years.
Personally, I like fixing because it makes life easier to budget. I overpay within the limits set by the fix and any excess I just collect in a separate account and take it off when I come to remortgage, or decide to invest. My buddy Damien Fahy of Money to the Masses has a great piece on his site about interest rates which is updated regularly.
Looking for the previous question? Or ready for the final Q&A post of the series?
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