How to review your investment portfolio

Are you still happy with the make-up of your investment portfolio? Rob Morgan explores the best ways to review your investments to ensure they are meeting your financial objectives.

| 6 min read

If you are managing your own investments, there can be lot to think about. Financial goals can change over time as you pass different milestones of life, and the amount of risk you wish to take can vary.

Reviewing your investment portfolio periodically can help you focus on any changing circumstances and check you are on course to meet your objectives. It’s also essential to keep tabs your different holdings to ensure they are performing as expected, or whether any improvements could be made.

How often should I check my investment portfolio?

This depends on the sort of portfolio you have and the type of investor you are. If you are looking to invest for retirement, say, and have decades ahead of you, a simple ‘set and forget’ portfolio of diversified funds or other collective investments may only need a quick check now and again – we would suggest once a year as a minimum.

If you are more hands on and active, particularly if you choose individual shares, then a more frequent assessment may be necessary to ensure things haven’t got out of kilter. Different asset classes rise and fall at different rates, especially in more volatile markets, so the overall make up of a portfolio can change over time, especially if you own riskier assets.

Additionally, if something important changes in your life, and especially if you are starting to think about drawing on your investments rather than building them up, then you should think about the consequences for how your portfolio should look and the amount of risk that’s appropriate.

How to review your investment portfolio

Lots can change in markets, sometimes quickly, sometimes slowly. Some areas may have been outstanding successes, others disappointing with poor returns. Understanding why each investment has performed the way it has is an essential first step to managing your investment portfolio and deciding what to do next.

Not only does this process help you get some insight around how different asset classes and markets are performing, but it will also provide important context as to how your holdings have done in comparison.

1. Check the relevant benchmark

    When you check funds, it makes sense to measure performance against its benchmark or sector they invest in. That way you are comparing apples with apples. You can then make an informed judgment about whether a fund has mostly done well or badly because of where it invests or, in the case of an actively managed fund, whether the fund manager has added or detracted value.

    Remember, all active funds will undergo spells of underperformance, so a period of relatively poor returns is not necessarily a reason to sell, especially over a short timeframe. However, it can be a prompt to consider whether there are any preferable alternatives.

    2. Be cautious when making changes

    It can be easy to be sucked into the constant barrage of market commentary and think you need to keep tinkering with a portfolio. That’s not the case. Making too many changes or being too reactionary can result in higher trading costs and eat into your returns in the long run.

    Try to think about the long term – are you still happy with the make-up of your portfolio for the next five years? That will help you decide whether you are making the changes for the right reasons, as shorter-term market moves are nigh on impossible to predict.

    3. Consider rebalancing if you notice big changes in performance

    If you are still happy with the investments, and the original allocation you started with, it may make sense to rebalance your portfolio by pruning the strong performing areas and topping up the back markers that have fallen behind. If things have not shifted much then you may not need to do anything, but if there are some big differences then you should consider acting. Doing nothing and running the winners unchecked will tend to introduce greater risk going forward.

      Rather than buying and selling investments to make the necessary changes, if you are still in the process of building up your portfolio you could consider just gradually adding to the lagging areas with any new contributions – again provided they remain suitable for your needs and aligned with overall objectives.

      4. Review your risk level

      If your portfolio has performed unexpectedly well or badly then you should also consider whether you have taken the right level of risk. There are always significant ups and downs when investing but through the right diversification and risk control you can temper those, either through selecting a greater variety of investments yourself or by using a very broad, managed investment at the core of your portfolio.

      For example, Charles Stanley’s own range of multi asset funds are designed to provide well-diversified exposure to a variety of asset classes in a single investment, and are actively managed and rebalanced by our experts to keep to a certain level of return and risk.

      5. Think about tax

      Although investment decisions are very important, when you are reviewing your investments spend some time thinking about tax too. That won’t take long if everything you own is housed inside a tax-efficient wrapper such as an ISA or SIPP.

      However, if you have investments outside of these then it’s important to check any changes to rules or allowances that might affect you. Recently, for instance, the dividend allowance and the capital gains tax allowance have been reduced.

      What can you do if you get stuck?

      If you are unsure of the makeup of your portfolio, the level of exposure to different sectors and areas, or amount of risk you are taking on, why not try our Investment Portfolio Review service? A consultation with a professional can help provide fresh insights to improve your portfolio going forwards.

      More broadly, if you have a financial question you are struggling to answer then you could consider Financial Coaching. We offer a free, no commitment, 15-minute call with a qualified professional to discuss your needs.

      Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

      Is your portfolio working hard enough for you?

      If you are unsure of the level of risk you should be taking or which types of investments to consider, a consultation with a professional can help provide fresh insights going forward.

      Investment Portfolio Review

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