Is now the right time to review your investment portfolio?

Man reviewing document

When was the last time you reviewed your investment portfolio?

If it’s not a task you regularly undertake it’s likely that your circumstances, and certainly those of the wider market, have changed. With the current market experiencing a level of volatility and uncertainty, now could be the right time to review your investment strategy.

There are many reasons for the current uncertainty in investment markets. But in the UK and EU, Brexit is one of the most prominent. With the Brexit date of 29 March 2019 fast approaching, and the issue of a deal with the bloc still being grappled with, the future relationship between the UK and EU is unclear. It means many businesses operating within the EU are hesitant to make decisions, not quite sure how an agreement will affect them yet. In turn, it’s impacting on markets.

Predicting the immediate and long-term effect of Brexit is impossible. A glance at the news will show you just how many conflicting opinions there are. But taking steps to protect your investments from volatility or dips that may happen in the aftermath of a deal is a prudent move.

If the last time you reviewed your portfolio was some time ago, now could be the perfect time to look at your strategy and how it reflects your wider goals.

However you invest your money, you owe it to yourself to ensure that you regularly review the performance, investment strategy and the charges you are paying to your portfolio managers. This is part of the ongoing service that we include for all our clients and we offer it to new prospective clients as well.

 

Why regular portfolio reviews are essential

Even if you want to take a hands-off approach to your investments, regular reviews should be considered essential.

Just looking back a decade shows that 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 and, as a result, so did pensions and investment portfolios. Many saw a level of recovery in 2009, with the overall investment market experiencing growth in the ten years since.

An investment strategy that delivered reliable returns pre-financial crisis 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 and that means reviews are needed. Even looking over a shorter timeframe you can see that there are changes in the stock market. If you’re to get the most out of your portfolio and assets, regularly reviewing what you hold is crucial.

Why now may be the right time to review

With Brexit fast approaching, now is a good time to take a look over your investment portfolio.

The uncertainty that is coming from Brexit, and the subsequent economic uncertainty, means that previous strategies may no longer be suitable. Your investments, for example, may now be exposed to a level of volatility and risk that you’re not comfortable with. On the flipside, volatility also brings opportunity. If you’re willing to take on higher risk, potentially leading to higher returns, now could be the time to act. Regular reviews mean you have a greater chance of taking advantage of these opportunities.

As a result, assessing your current exposure to market uncertainty can help keep your portfolio in line with your attitude to risk. If you’re unsure of where your investments are, it’s advisable to take this step now. Brexit is still a little time away, but taking action sooner allows you to prepare. Leaving the step of reviewing your portfolio until after Brexit has concluded could mean missing out on opportunities and being exposed to unnecessary volatility in the months before and after the deadline date.

How often should you review your investment portfolio?

We’ve established reviewing is important. But how often should you review your investment portfolio? At Choice Financial Solutions we offer a quarterly portfolio review service, but believe everyone should do so on at least an annual basis, as part of a wider financial planning review, as well as after large events.

Large events may be those that are affecting the whole of the market, as is the case with Brexit, or personal, for instance, if you’re planning to retire soon or want to start a family.

It’s 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:

 

  1. 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, giving 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, reinvesting the returns to enhance this. Now, life changes may mean that you’d 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.

 

  1. 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 flip side, there’s a higher chance that your investments will decrease in value too.

Your wider financial situation is likely to have an impact on your appetite for risk. If you’re financially secure, investment value declines over the short term may not impact your lifestyle, and 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.

Reviewing your portfolio is the perfect time to consider the level of risk you’re currently taking and how this matches your attitude and goals.

 

  1. 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, giving you an opportunity to adjust where necessary. It’s 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, or you could even discover you’re in a position to retire sooner than expected.

 

  1. 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. It’s a move that’s essential for determining if you’re getting value for money.

There are several different ways fees can be calculated when investing, such as 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’ll be investing for, and more.

The review process allows you to see if your investment portfolio is still the best fit for you, including the amount you pay out. It’s also an opportunity to review new market offerings that may be suitable and offer lower fees while still achieving the outcomes you want.

 

  1. Reflect regulatory changes

Changes in legislation could mean that you’re 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’re getting the most out of your finances in light of regulatory changes. Some changes won’t impact you, but 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.

 

  1. Take economic changes into account

We’ve already mentioned that economic changes have an impact on your investment returns. At the moment, Brexit is one that could have a significant effect on your portfolio. But over the course of your investment strategy, there will be countless examples of where economic changes can mean greater levels of risk or opportunity.

It’s not always possible to gauge when economic changes will affect investment markets and 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.

 

  1. Consider your approach

There’s no right or wrong approach to how you handle your investments; it’s 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’ll next consider your investments and how you’ll keep on top of your portfolio if you want to take a more hands-on role.

Taking a long-term view

While the seven arguments above advocate an active approach to reviewing your investment portfolio, it’s important not to get too caught up in watching stocks and the value of your assets too.

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, and it’s crucial to look at the overall trend in the value of your portfolio. A few dips in value shouldn’t be a cause for alarm but if it’s something you’re worried about, you can speak to us.

If you’d like to understand how your current investment portfolio is performing in relation to your financial goals, please contact us. Whether you’re worried about the impact Brexit will have on returns or need to update your financial plan following life changes, we’re here to offer you guidance and advice you can act on.

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