As well as burning a few calories and getting your waistline back into shape, January can also be a great time to give your investment portfolio a thorough ‘work out’ ahead of any plans you might have to invest new cash into the markets before the end of the tax year, for example into an ISA or pension.
With February and March typically being the busiest times of year for investing as people rush to beat the end of tax year deadline for ISA and pension contributions, it is all too easy to get caught up in the end of tax year frenzy when the papers are full of expert tips and fund companies ramp up their advertising campaigns. Yet getting distracted by whatever funds are flavour of the month, or topical for the newspapers, can lead to investment portfolios that over time end up looking like museums of yesterday’s ‘hot tips’ rather than a well-structured strategy to meet your goals.
A more sensible approach, in our view, is to periodically step back and appraise your overall portfolio and to make new investments that fit well with what you already own, rather than making ad hoc investments. An existing portfolio will drift over time as different investments held won’t grow at the same pace and this can lead to a situation where the risk profile of a portfolio evolves over time into something very different from what may have originally been intended. And of course, individual investments that may have been worth backing in the past might need to be reassessed from time to time, for example because the fund manager has changed.
For these reasons, it is vital to review your portfolio and give it the equivalent of a ‘detox’ at least once a year. In so doing you will have a better idea of where you should focus any new investments you might make.
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This article was previously published on Tilney prior to the launch of Evelyn Partners.