Hi,
I have been learning about ETF and opened a DIY ISA. I have an ETF which shows for example 4% increase approx £50 growth over past month.
I understand that in autoinvest this money goes back to buying securities based on my portfolio distribution %
Could I withdraw the £50 gain and choose to buy a different ETF? Basically, could I keep removing the money gains each time and put that back into a different ETF manually,
I hope my question is clear.
Hi @vishnuuvm
“Autoinvest” is a feature that automatically reinvests your dividend and interest income, so that the cash doesn’t sit on your account.
What you’re referring to sounds like it’s just a gain in the price of the ETF. You could if you like sell some and reinvest that into a different ETF.
AutoInvest is mostly for people who have ETF percentage allocations that they’re happy with, and would like to keep investing according to those allocations.
To achieve what you have in mind, I would suggest the following:
If you don’t like waiting for the next trading window, you can execute a buy at the same time as your sale, but only with 95% of the proceeds of the sale. The remaining 5% will land in your portfolio after the trading window, as cash awaiting settlement. See this FAQ for how that works.
I haven’t personally executed this series of operation; they are just from my understanding of InvestEngine’s documentation. If somebody who has actual experience, or an InvestEngine representative, knows a better way, please do enlighten us.
The gain you’re describing hasn’t been ‘reinvested’ - it’s simply an unrealised gain.
For example you buy 100 shares at 50p - total value £50. If the share prices rises 10% to 55p, you have 100 shares at 55p, total value £55. The £5 gain is an unrealised gain. To realise this gain you’d need to sell 9 shares and use the cash proceeds to reinvest.
Another poster has described how to realise the gains and reinvest on investengine
Thank you (sjdimelow, chungf, shrimper) for your replies.
It is now clear, I was trying to understand more about the gains that I see on the ETF.
Hypothetically, I was thinking if the long term (15 year) investment returns are around 7%. In the short term that I have started using this platform, some etf’s change price more than others in the very short term for whatever macro and local market conditions.
Would it be possible to have a setup where if my etf produces a 15% gain, I sell some shares to realise the gain and invest that in different shares. If I repeat this enough times, does this actually give you any advantage. I am assuming the transaction costs will have an effect and if we assume I do it on in this platform the actual time when trades are executed can also have an impact on the gain.
Thanks again for your replies.
There’s a lot to unpack here.
By selling part of an ETF whenever it enjoys outsized gains relative to the expected long term market’s average gains, you will be making 2 assumptions:
And by using the proceeds to buy another ETF (or just leaving the proceeds in cash), you are further assuming:
While the long term average gains of the market as a whole can be calculated and stated with some degree of certainty, all of the assumptions above have something to do with:
… which makes the outcome much less certain.
The market average is made by all the equities, some better than the average, some worse. Personally, I would rest my hope upon identifying ETFs that invest in the better-than-average side of the market, and then diversifying among those ETFs right from the start, rather than starting with one ETFs and then drifting on to a second and then a third. That’s just due to my own preference to have all my investment choices thought through up front, though.
Thanks again for your reply.
It is mainly a question from my side to understand what actually happens. This is a rabbit hole that I do not want to explore, 
nevertheless curious. I was reading in this forum that the gains do not automatically increase the number of shares, instead increase the value of shares (hope this is correct)
To your point, I do not have to necessarily buy the same ETF again as it would have become expensive now, I was imaging a scenario where someone is tracking the ETF market and buying different ETFs with the gains. If you continued long enough, would you end up with an ETF portfolio. However, the underlying companies that make the ETF are likely to overlap and create a scenario of over exposure in some regions/companies. The other side of the coin is that not all companies within an ETF will be responsible for the gain, and you are basically carrying them along for the sake of the ETF.
I was thinking if it is possible to apply the concepts of a day-trader / active trading and comparing it against long term investment strategy of buy and wait. I do not know if this makes sense, but it is fascinating to learn about finance/stock market.
Thanks again for the responses.
You have already assumed each ETF you buy will make some gains, which you will then sell partially and use the proceeds to buy the next ETF, which will also make some gains, etc. If this assumption holds (not a sure thing), you will end up with a collection of ETFs that represents a lucky streak in the past. What happens in the future for this collection of ETFs though is uncertain.
Having zero experience with day trading, I’d suppose it involves rapid trend following and critical timing. Those would be difficult to do for most ETFs in general, and on InvestEngine in particular. Reasons:
I encourage you to read through the Orders and Trades help pages, get a good feeling of the trading mechanisms at InvestEngine, and adapt your game plan so it works under those mechanisms.
I’m a firm advocate for going into investment with a well-thought-out plan for where you want to put your money and a clear idea of the characteristics of what you are buying.
Yes, there are a lot of underlying assumptions.
The more one investigates, one finds that there are so many variables that can have an affect on positive growth.
Perhaps that’s why etf are like a nice wrapper to absorb all the uncertainties and give us a nice headline number. As long as one is patient for 15/20 years the market wil correct itself. along with inflation and other trends you could be better off with your investments, assuming nothing drastic happens at the end of the wait cycle period I.e you are not caught at a recession.
This forum is informative and interesting to see how people are approaching the same market with their judgements but in reality everyone of us is just guessing some of us get more lucky than others.
One of the voices in my head tells me that all this futile as anyway the entire stock and trading is just bogus but that topic is reserved for another day.
Thanks again for all the responses