The January weigh in: putting your portfolio on the scales
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?
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?
You may also like to think about your attitude to risk. Is it still the same or has that too, changed?
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?
Rebalance your portfolio if you think necessary and fill any gaps you have discovered.
What help can you get?
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In the meantime, good luck with all of your new year’s resolutions!
NB: This blog was originally published on FundCalibre in January 2016 and edited for re-publication in December 2017
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.
