Should I lock in trust profit?

By THIS IS MONEY
Updated:

 

I invested £1,150 in an investment trust with Fidelity special values at 121 only 18 months ago. It is now 260, having dropped from 272. After making such a large gain in a short period of time would it be wise to lock in the profit? The reason I ask is because it took from 1994 to 1999 to make it to 121 then only 18 months to go to 272. KF, Nottingham

Justin Modray, independent financial adviser at Funds Direct says: When looking at stock market-based funds, it is a mistake to compare the returns of one fund over different time periods, because its performance will be affected greatly by general stock market conditions which can vary.

A better way to judge of relative performance is to compare the fund to others investing in a similar style. This provides a reasonable indication of whether a particular fund manager has been effective at running the fund.

Nonethess, in the current economic climate it is tempting to lock in the gains made to date, so as to safeguard profit. But unless you need to get your hands on the cash, there is still an argument to leave to money invested, as the fund still offers the potential for good returns over coming years, albeit with some volatility along the way.

If you are unsure, you could plump for a compromise and encash perhaps half of the fund and invest elsewhere to increase diversity - generally a good idea for investment portfolios.

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