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19 January 2017

The January weigh in: putting your portfolio on the scales

By Darius McDermott, Managing Director

Hopping on the scales in the first week of the new year is no-one’s favourite task but the January weigh in is an opportunity to re-assess more than your exercise and diet plan. When was the last time you ran a health check on your portfolio?

As different sectors, asset classes and economies perform differently over the course of a year, the value of your investments can also shift. Some of your holdings may have ‘put on weight’ (gained in value), while others may have fallen. In short, what was a perfectly diversified portfolio a year ago may now need some tweaking to optimise your chances of investing success and help protect your savings for the year to come.

Why does it matter?

Say you’ve built a balanced growth portfolio, with a certain percentage of your money in UK, European, US, Asian and emerging market equities (as well as bond and absolute return) funds.

If one of your investments is significantly outperforming everything else, it is tempting to hold on to it or even increase your stake, but holding a large percentage of your money in any one investment increases your exposure to risk.

Simply by failing to address imbalances that may occur naturally after significant price gains or falls, you could be introducing more risk into your portfolio than that with which you’re truly comfortable.

It’s a question of both risk and opportunity. As we all know, investment values can fall as well as rise and not even the professionals can always predict when markets, currencies or economies will take a tumble.

It’s not all doom and gloom though. On the flipside, re-balancing may free up some capital to take advantage of new opportunities.

What steps can you take?

  1. When you review your portfolio it's a good idea to take a step back and re-familiarise yourself with your investment goals. What are they, and have they changed?
  2. You may also like to think about your attitude to [risk](/whatisrisk 'What is risk?). Is it still the same or has that too, changed?
  3. With points one and two in mind, take a look at the asset allocation and geographical spread of your portfolio. Does it look about right or do you think you need to adjust it?
  4. Rebalance your portfolio if you think necessary and fill any gaps you have discovered.

What help can you get?

Key themes for 2017 include higher inflation and rising interest rates around the world. Trump is obviously someone to watch closely - both for his impact in his home market and in markets abroad, such as China and other emerging nations. Closer to home, the wheels of Brexit are being slowly put in motion.

Check our website regularly and subscribe to our email newsletter to keep on top of all the latest news and insights from our research team, as they scour the market to keep you in-the-know about the best opportunities around.

In the meantime, good luck with all of your new year’s resolutions!

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius' views are his own and do not constitute financial advice.

NB: This blog was originally published on FundCalibre in January 2016 and edited for re-publication in February 2017

©2016 FundCalibre Ltd. All Rights Reserved. The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (5) are not warranted to be correct, complete, or accurate. FundCalibre, shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use.