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Thinking of cashing in your investments? Consider your options

Thinking of cashing up? 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 know some of the pros and cons and speak with your financial adviser or call us on 13 13 36.

Will you be liable for capital gains tax?

If you sell some or all of your investment, you may trigger a capital gains tax event. This includes moving to another fund. A capital gains event means you may pay tax on the difference between the investment’s original cost and its sale value. The tax is at your marginal rate which could be as high as 46.5%.

If you have owned the investment for more than 12 months, the tax liability may be discounted by half, but it’s still worth checking with your financial 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 financial adviser.

Even experienced investors find it almost impossible to successfully predict the movements of investment markets.

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 most appropriate 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 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.

S&P/ASX 200 2001 - 2011

Source: Data to 30 June 2011. IRESS Chart shows the value of $10,000 invested on 31/12/79, S&P/ASX All Ordinaries Accumulation Index. Past performance is no indication of future performance.

Have you spoken to your financial adviser?

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

  • Assess the effects of a decision to withdraw
  • Discuss alternative options
  • Assist you in balancing your short-term goals with your long-term needs.

Alternatively if you don’t have an adviser we can help, so please call us on 13 13 36. Although we are not licensed financial advisers, we may be able to help you understand some of the implications of withdrawing, or refer you to a qualified financial adviser.

Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (Colonial First State) is the issuer of the FirstChoice range of super and pension products from the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557. Colonial First State also issues interests in products made available under FirstChoice Investments and FirstChoice Wholesale Investments. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) and Financial Services Guide (FSG) carefully, assess whether the information is appropriate for you, and consider talking to a financial adviser before making an investment decision. The PDS and FSG can be obtained from or by calling us on 13 13 36.