How and when to balance your portfolio

1st July is a very significant date. Not only is it Canada Day, International Joke Day, International Chicken Wing Day and – most importantly – my birthday, it’s also the half-way point of the year. It’s an excellent time to check in with both your New Year’s Resolutions and your finances too. Ideally, you should be checking in with your finances every 6 months and while January and July fall in line with the calendar year and any annual goals, March and September would coincide nicely with the tax year. Pick whatever dates work for you and stick to them.

“Believe you can and you’re halfway there.” — Theodore Roosevelt

Checking in with your finances should include everything from credit card statements, student loan agreements and personal loans to car repayments and investments. Everything should be included in your budget and, for any larger plans, it’s good to refresh your memory with the actual figure, no matter how scary it might seem.

Prioritise larger debts

If you have large debts, credit cards or personal loans (not mortgages), be sure to note the interest rate as well as the amount. In a paperless world it’s easy to lose an email that notifies you of an interest rate hike. Take the time to make a spreadsheet with the amounts, note any final payment dates and changes in costs. Can you make payments over the minimum payment? If yes, consider whether a snowball or avalanche approach is best for your situation. Alternatively, you could see if you’re eligible for a 0% balance transfer.

Update your budget

You’re hopefully checking in with your budget every month so there shouldn’t be any surprises with your bank balance. But use this time to go through old statements and see just where you’re spending and consider if you can cut down to reallocate that money. Now’s a good time to make any major changes to your budget.

Balance your portfolio

Don’t already invest? Consider opening an account and making your first investment. Not in a position to invest right now? That’s okay too. Already have an investment portfolio? Check in with your investments and ensure that your portfolio aligns with your attitude to risk and desired asset allocation. Asset allocation refers to the percentage of your portfolio that’s held in different investments, such as 80% stocks and 20% bonds.

How to invest at every age

When I opened my first investment ISA, I put 100% in equities. While I still have a high equity contribution in my portfolio, I have diversified into other asset classes through the use of multi-asset funds. Rebalancing your portfolio is natural. It doesn’t mean what you initially choose was wrong, it’s just not right for you now. Think of it like an MOT for your portfolio, allowing you to maintain your desired level of risk over time.

If you don’t want to rebalance your portfolio all the time, you could consider investing in a fund and a manager that does this for you – a multi-asset fund.

Four multi-asset funds that do the thinking for you

Liontrust Sustainable Future Managed
The sustainable team at Liontrust is one of the largest in the UK, and this fund is managed by three co-managers with over 30 years of industry experience. The fund invests in sustainable companies that the managers believe will shape the global economy of the future. The portfolio has 40-60 stocks and currently includes household names Alphabet and Visa.*

TB Wise Multi-Asset Growth
A unique fund in the flexible sector meaning the fund can invest up to 100% in equities. The managers invest in around 30-60 underlying funds and investment trusts, with a preference for out-of-favour areas. The fund currently has 64%* in equities and 27%* in alternatives. Alternatives include investment trusts and funds that invest in gold and mining.

M&G Episode Income
The manager of this fund uses behavioural finance in the fund’s process and invests directly in individual stocks and bonds, while property exposure is gained by investing in property funds. It currently has 41%* in government bonds including emerging markets like Brazil and South Africa, alongside equities, infrastructure and property.

Close Managed Income
For the more conservative, this fund is an option. It invests in both actively-managed funds and exchange traded funds. The portfolio offers strong diversification with a mix of regions as well as equities and fixed interest and alternatives. In an interview earlier this year we learned about a few of the alternative investments in the portfolio, including music royalties.

*Source: fund factsheet, May 2021

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.