Withdraw funds or not?

[Truetoself]

My 19 year old rhinks that instead of leaving his money in a S and S ISA whilst it depreciates at the moment, it is better to withdraw the funds, watch the market and when it dips lower, to rebuy the shares.
Now from what I heard, no one has been able to accurately predict the market and the general
advise seems to be not to withdraw money in a panic. However, what is wrong with his strategy? It may is likely to dip lower and take a long time to recover. Whereas if you withdraw what you have now, you can buy more shares with it later?

You can only buy more shares later if it goes down.

if it goes up and you’ve sold then you’ve locked in your loss.

what you need to think about is what will you do with the money if you sell. Do you need it to buy something now? You shouldn’t really have money in S&S if you need it in the next 2-4 years for this reason… it can go up and down on a monthly basis but over 5 years it almost always only goes up

Yes I am happy to keep it there for 10 years and keep adding funds.
my 19 year old thinks rather than wait for it to depreciate further, it’s better to withdraw it and reinvest it when he thinks the value is near it’s lowest. This is for his S and S ISA that we are letting him manage himself. He could keep it in a normal bank account. He does not need the funds for his own use at the moment.

He has a good grasp of the concept but I think the general advice is don't be reactive and only look once at the balance once per year.

@Justsaywhatyoumean123that’s what I told him. In principle, do you think he is wrong?

If you take 1000 out of your isa and keep it in cash, inflation will reduce the value of your cash and you won’t be able to afford to buy much later. Investing should be long term - don’t try to chase value from week to week. Just buy and hold for 10 years or more.

It’s not really the right mindset for an ISA, but buy low, sell high is of course a brililant concept to explore with other asset classes. If he’s keen to learn how it works in real life, he could try an app like Trading 212 and start with a small amount — even just £20–£50.
Actually, I think they even have a virtual trading mode, where you can practise with fake money first. I should really take my own advice, (hint I was a bit reactive this morning with my ISA and now deeply regretting it)

@parietalthat’s what I plan with my own. @Justsaywhatyoumean123well you won’t be alone! All the money podcasts I have listened to auggest that no one has beaten the stock market yet! Well I suppose there are some traders whose job it is to study this and try and beat it and they may have got it right so I am unsure why they say you can’t beat it

Just look long term. Nothing is normal with that fucking lunatic in America right now.

Some people make a lot of money doing that. However they will also only doing it with a relatively small amount of huge portfolios and will lose money on some trades but have the resources to come out ahead overall over time.

However it's an incredibly risky strategy for the small scale amateur investor and most who try it will lose money.

Hi
I just wanted to point out some flawed logic - not being rude but we all have our blindspots

Any "loss" is regarded as a paper loss. It is only a loss when you withdraw the funds.

If they are fixated on market fluctuations, S&S ISA probably not their ideal product. Perhaps look into Global Funds Index (I am not a financial advisernor qualified so just suggestion to investigate). That is investing.

From your post, withdraw and buy shares at a reduced price isnt investing, it is gambling. You can win and lose big but gambling can be risky.

Once they know if they are willing to risk for more/less or invest, that should lead them to their next step.

If he had been following the markets he would have guessed there would be falls due to Trumps behaviour and sold them earlier or perhaps sold half of them.
Im sure Trumps cronies will have got out with a bit of insider dealing.
Surely you don’t sell after a fall - worst thing imv.
He has to sit tight. And cross his fingers that things right themselves.

He's only got half of it right I think. You do want to invest when it's low/shares are cheap. But the time to withdraw to rebuy was before the market started to drop, not once the shock has happened. Selling when cheap crystallises the loss and makes it real, and its really risky to then bet on the market dropping even further to be able to buy back in and see growth. He'd need it to fall by the same again to just recover his position, before he'd see any benefit.

Professionals who do this will hedge, I.e., spread the risk by simultaneously imagining a few different possibilities amd betting on those. They ultimately benefit less (the hedge has a cost) but they reduce the risk of it going wrong and losing everything too.

Maybe tell him to think of it as houses. His ‘house’ (the money in his ISA) has just as many doors and windows as yesterday, it is just worth less than before technically on paper. If he sells it now, it’s definitely worth that lower value, but if he holds onto it the market is very likely to tick up again and his house will be worth more in the future. At the same time, it’s a great moment to buy more houses (obviously not real houses but invest more, you get my drift).

Thanks for everyone’s input

The whole point of ISAs is that they are tax free savings
He could move it to

Cash ISA
LISA

Or up to a maximum of 50k per person of Premium Bonds. All prizes are tax free

Or pay into a pension & receive some tax relief.
However he will not be able to access the money until earliest 57

I definitely wouldn’t take it out as if it goes up, you’ve locked in at a loss.

He’s not wrong, in that crystallising the loss now and reinvesting if the market drops further would generate most returns. But taking it all out and putting it on the winning grand national horse yesterday would have got you even more returns.

It’s impossible to know whether the market will drop further, and I’m taking the view that even if the market drops further we’re at a good buy price at the minute and so putting more into my S&S ISA. There is an element of gamble with this, but it at least relies on the relatively safe principle that markets always increase if you wait long enough, and I can wait.

I won’t be gambling that the markets drop further, because it’s just as likely they don’t or that they bounce back and then you’ve missed out.