Dogs, ISAs and taking risk

Staci West 19/03/2019 in Basics

The first day of spring is here, the cherry blossoms are filling Battersea Park, and daffodils are popping out of the ground as the weather very slowly begins to turn. It’s my favourite season, full of fresh springs and lazy afternoons in the park walking the dog. I’ve recently learned it is also ‘ISA season’.

Before starting this role I would have never thought ‘ISA season’ was a phrase used even once, let alone daily. It also means when people ask about work on those afternoon walks through the park, I find myself answering ISA this, and ISA that, which prompts the question: so what do you invest in?

Many of friends stick to cash or an index fund because “it feels safe and simple” and the notion of ‘building a portfolio’ seems overwhelming and scary. The general consensus seems to be they think they need a have between 10-15 funds to have a good portfolio, so instead they choose a tracker fund and call it a day.

It’s important to note that the number of funds which should be held within a portfolio will vary depending upon the amount invested. As a rough guide, a reasonable number would be around 10 funds in a portfolio of over £30,000 and 15-20 in one over £100,000. But where to start?

‘The secret to getting ahead is getting started.’ – Mark Twain, author

Consider the risk

Start with asking yourself, are you a risk-taker? No, it’s not a typo – your personal attitude to risk is very important and acknowledging it about yourself will give you a much better night’s sleep.

Now ask yourself can you take the risk? For most young investors the answer will be ‘yes’ when it comes to retirement as it is such a long time horizon, but maybe the answer is ‘no’ if you need the money soon for a house deposit. So it’s important to consider what the money is being used for and when, when you think about risk – especially if you’re a natural-born risk taker.

Read more about the four types of risk to consider. 

Find your balance

While I’m a huge risk-taker when it comes to my personal life and love the adrenaline from bungie jumping, the idea that all my money could be in emerging market equities would put me in a hot sweat. That doesn’t mean I’ve shunned all emerging markets and only choose low-risk investments – it simply means I’ve found a balance that works for me.

For example, balancing higher-risk Magna Emerging Markets Dividend with lower-risk M&G Strategic Corporate Bond, would give me both equity and bond exposure and it takes into account my own attitude towards risk, meaning I would sleep better at night.

Monitor your growing portfolio

Whether you’ve started with one, two or five funds, remember to monitor your portfolio, at least on an annual basis, as some of your investments will outperform and others will underperform, so your portfolio weightings may have shifted. This could mean you’ve accidentally taken on a higher or lower risk profile than you intended and you need to rebalance. It could also be time to add another fund to your growing portfolio.

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions.Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice.Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.