I’VE mentioned Investment Reviews quite a lot in recent articles so I thought it would be useful to outline what these would entail in a bit more detail.

Heading towards the end of the year is a popular time for me to sit down with clients and review their financial situation and investments.

But what are the steps you should take when reviewing your investment portfolio?

As a specialist investment manager for private clients we will normally do an in depth review including the underlying holdings of the portfolio for each individual client but there are 6 basic first steps everyone should take:

Step 1: Review Your Asset Allocation

Most client portfolios will have a mix of asset classes that will often include equities, fixed interest, property and cash.

It’s important to make sure that the portfolio still reflects your current goals and attitude to risk. 

Most equity funds have had good returns over recent years thus risking unbalanced portfolios.

If your required weighting of an asset class is just a few percentage points out from your target there is not much to be concerned about, however where the allocation of an asset is more/less than 10% out of the target range it may be time to re-balance things.

That’s more important the closer you are to the end of your time frame for investment. 

Jonathan Holdaway 329
INVESTMENT: Regardless of the amount, there are six steps everyone should take to look after their money

Step 2: Check Your Equity Sector Positioning

Look at the holdings you have within your equity investments to review which sectors most of your money is within.

It’s important not to be too over exposed to a specific sector e.g., technology or financials. Diversification is just as important when it comes to sector weightings in the portfolio as it is when looking at overall asset allocation. 

Step 3: Think Globally

The next step is to check how your equity exposure is apportioned internationally.

Many clients are perhaps not diverse enough in their exposure to international markets, especially where they have a longer investment time frame and should be taking more risk. Investors should not ignore global market capitalization when building their portfolios

If you’re closer to or in retirement, it makes sense to reduce the international market weighting.

Step 4: Assess Your Fixed-Income Positioning

Increasing interest rates are a concern for a bond investor, however, the biggest concern when I see most portfolio’s is the poorer quality of debt. 

High-yield bond funds have seen strong inflows recently but many mixed asset funds have also been reducing quality to increase yield.

As part of a portfolio review, make sure that your fixed interest/bond holdings offer true diversification.

Step 5: Take Stock of Liquid Reserves

As well as reconsidering your long term investment allocations, you should also check your cash reserves.

Have you got six months cash in your bank account in case of emergency?

If you are retired this portion should be even greater with up to a year’s worth of expenses recommended.

If you have more than this, it may be time to consider investing a greater amount in your long term portfolio, to potentially generate better returns and keep up with the impacts of inflation on your net worth.

Step 6: Look at costs

Reducing costs of the investment is the same as increasing returns so take time to check how your investments are structured: review and compare the costs of your platform or product you are using costs.

Research the market to see if there are cheaper or better alternatives out there.

Find out how much are the annual management charges on your funds or ETF’s, and whether you can buy similar funds more cheaply.

Are you getting value for money from your active managed funds or would ‘passive’ funds be more suitable in certain markets or asset classes?

Please note, the above does not constitute specific advice or recommendations for your own circumstances and is intended as a guide only.

Always seek professional assistance where required.

For a free no obligation review please contact me either by email or phone.

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