Investment Portfolio Review

However you invest your money, you owe it to yourself to ensure that you regularly review your investment portfolio.

This involves reviewing the:

Performance

Investment Strategy

Charges you are paying to your portfolio managers

Regular Portfolio Reviews

Although you may want to take a ‘hands-off approach’ to your investments. Regular reviews should still be considered essential.

Looking back a decade, a lot has changed in the markets. In 2008, we were still in the midst of the financial crisis. Many stocks and shares fell significantly in value. As a result, so did pensions and investment portfolios. Many funds saw a level of recovery in 2009. In the ten years since, the overall investment market has experienced growth.

Pre-financial crisis, an investment strategy that delivered reliable returns, is highly unlikely to offer the same certainty now. This is before you even factor in that your personal objectives may have changed during the last decade too.

The investment market is fast-paced. This means reviews are needed. Even looking over a shorter timeframe, you can see that there are changes in the stock market. To get the most out of your portfolio and assets, having regular reviews is crucial.

How Often?

At Choice Financial Solutions, we offer a quarterly portfolio review service. We believe everyone should do so on at least an annual basis. This is as part of a wider financial planning review, and also as after large events.

Large events may be those that are affecting the whole of the market, for example, Brexit. Or it could be personal, for example, if you’re planning to retire soon or want to start a family.

Reviewing your investment portfolio is a step that can mean you get more out of your money and improve financial security.

There are many benefits to undertaking a review, among them:

Realign your portfolio with your goals

Throughout your life, your aspirations will change. It’s imperative that your financial plan, including your investment portfolio, is updated to reflect this.

Your investment strategy should reflect what you want to achieve, especially in the long term.

It’s advisable that investments are made with a plan to invest for a minimum of five years. This gives you a greater opportunity to overcome dips in the market. Over this timeframe, it’s normal for both planned and unexpected events to change your aspirations.

When you first began investing you may have been keen to achieve as much growth as possible. For example, you could have been reinvesting the returns to enhance this.

Now, life changes may mean that you would prefer to take an income from your investments. Perhaps with a goal of maintaining value or even reducing your portfolio size over the long term.

Assess your risk profile

As with your overall life goals, your attitude to risk will change over time too. The general rule of thumb is that the greater the level of risk that you take, the higher the potential returns. Of course, on the other hand, there is a higher chance that your investments will decrease in value too.

Reviewing your portfolio is the perfect time to consider the level of risk you are currently taking. In addition, how this matches your attitude and goals.

Your wider financial situation is likely to have an impact on your appetite for risk. If you are financially secure, investment value declines over the short term may not impact your lifestyle. Therefore, you may be inclined to take greater levels of risk.

Likewise, there will be points where you want to take a more cautious approach with some of your investments, such as nearing retirement.

Understand how your current portfolio is performing

Do you know what returns your investment portfolio generated in the last 12 months? Was it affected by market dips? Did it recover or even prosper from volatility?

If you have no idea how your portfolio is performing at the moment, you may be making decisions based on inaccurate information.

You want to get the most out of your money in a way that reflects your financial plan. Unless you have the right information at your fingertips, it’s difficult, if not impossible, to make informed decisions.

A portfolio review is an ideal time to ask how your investments are performing. This will give you an opportunity to adjust where necessary. This is a step that can improve your financial security.

For example, if you planned to retire soon and use your investments to provide an income, a review could identify whether you have enough to meet your income needs. Discovering a shortfall beforehand allows you to take steps to minimise this. On the other hand, you could even discover you are in a position to retire sooner than expected.

Check the cost of your portfolio

In the context of the performance of your investment portfolio, you should also look at how much your investments are costing you. This is a move that is essential for determining if you are getting value for money.

There are several different ways fees can be calculated when investing.

As an example, an expense ratio or management fees. Which fee structure is best for you will depend on the size of your portfolio, investment goals, how long you will be investing for, and more.

The review process allows you to see if your investment portfolio is still the best fit for you. This includes the amount you pay out. Also, it is an opportunity to review new market offerings. They be suitable for you and offer lower fees, while still achieving the outcomes you want.

Reflect regulatory changes

Changes in legislation could mean that you are missing out on investment opportunities that match your goals. Or that your investments are no longer as tax efficient as they once were.

Reviewing your financial plan and investment strategy will mean you are getting the most out of your finances in light of regulatory changes.

Some changes will not impact you. However, those that do, should be considered. A meeting with your financial adviser can help you understand what the changes mean for you and how to capitalise on them.

It can be difficult to understand how regulatory changes will affect your financial plan. Particularly if you hold multiple or complex assets. Even if you realise you should restructure some of your assets, you probably have more than one option open to you. If you need support in this area, we can help.

Take economic changes into account

Over the course of your investment strategy, there will be countless examples of where economic changes can mean greater levels of risk or opportunity. One example is Brexit.

It is not always possible to gauge when economic changes will affect investment markets.

Also, predicting what will happen is just as difficult. However, understanding how it could impact on your investments and taking precautionary steps where necessary, can help maintain or even grow the value of your investments.

Trying to time the markets is rarely a good idea. But getting an overview of how wider changes in the local and global economy could impact your wealth, can help you make the right decisions with your goals in mind.

Consider your approach

There is no right or wrong approach to how you handle your investments. It is a personal choice.

While some prefer to take a hands-off approach, others feel more comfortable being involved on a regular basis.

Setting out how involved you want to be during a review can help manage the process going forward. It gives you an opportunity to set out when you will next consider your investments. In addition, how you will keep on top of your portfolio if you want to take a more hands-on role.

Taking a long-term view

It is essential to review your investment portfolio. However, it is also important not to get too caught up in watching stocks and the value of your assets too.

It is crucial to look at the overall trend in the value of your portfolio.

The nature of investments means the value of your portfolio will decrease at points. Dips in the market will usually smooth out when you take a long-term view. So, while reviewing is important, stock watching can be detrimental.

A few dips in value should not be a cause for alarm but if it is something you are worried about, you can speak to us.