There are implications that come from selling units in your investment, especially in volatile markets. So, before you decide to withdraw your money, make sure you’re aware of the three points below

Will you be liable for capital gains tax?
If you sell some or all of your fund, you may trigger a capital gains tax event. This also includes switching to another fund.

A capital gains event means you may pay tax on the difference between the original cost and its sale value. This tax is at your marginal tax rate which could be as high as 46.5 per cent. If you have owned the investment for more than 12 months, the tax liability may be cut in half, but it’s still worth checking with your personal adviser to assess any potential tax liability.

Will selling ‘crystallise’ your loss?
Most managed funds fluctuate in value, often sharply. If your investment has gone down in value because of market volatility and you decide to switch or withdraw the possibility of recouping your losses is lost forever. So, it’s important that you weigh up the chances of an investment recovering, and speak to your personal adviser.

Will you miss future growth?
It’s important to consider that you may be withdrawing at a time when markets, and potentially your investment value, are down. This means you risk missing a rebound in markets and any future growth opportunities. Even experienced investors find it almost impossible to successfully predict the movements of investment markets.

If you hold multiple investments and require access to funds, it’s worth talking to your adviser to ensure you withdraw from the right investment to minimise the impact on your investment strategy.

The chart below shows the performance of a $10,000 investment in the ASX 200 over the last 10 years. You can see the difficulty an investor would have, no matter how experienced, successfully picking the tops and bottoms of the market over the long term.

Have you spoken to your personal adviser?

Before you withdraw, make sure you understand the effects this withdrawal may have on your investment strategy. If you have a personal adviser, they can be invaluable in this process as they can review your situation and help you:

• assess the effects of the decision
• explain what may happen and discuss alternative options with you
• assist you in balancing your short-term goals with your long-term needs

The views and opinions contained herein are those of Kym Marriott, and may not necessarily represent views expressed or reflected in other Life Balance Financial Professionals Pty Ltd (LBFP) communications or strategies.
This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but LBFP does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that LBFP has to its clients under the Financial Services Reform Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.