The new tax year is here! Six essential checks for your investment portfolio

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Lots of people rush to make investments and fill their ISA before the tax-year end. But now we’re in a new tax year, and there’s a bit more breathing space until the next deadline, it’s a great idea to check your portfolio is still working for you. You may also want to work out where to invest any new contributions you made before the ISA deadline, or check that any investments you did buy fit with your long-term plans.

While the weather may not feel like spring, it might be a good idea to spring clean your portfolio at this time of year and weed out any investments that have gone off track, check you’ve not put too many (Easter) eggs in one basket and that you’re on track with your investment goals.

Portfolio Checklist:

Do your investments still fit your plan?

Lots of people might start investing with no specific goal in mind, or many people will have started investing decades ago and not changed their strategy during that time. You may want to make sure that your portfolio fits with your current investment goals.

First, you may want to know what you’re aiming for. Investing without setting a goal is like going for a drive without a destination in mind. When you have an objective it’s easier to figure out how much risk you can take and which assets might be suitable.

Next you may want to look at the type of investments you have, how diversified they are, how much risk you’re taking and where you plan to put any new money you pay in this year. Rebalancing your investments every year or so is also important to make sure you don’t end up with an unbalanced portfolio. If some investments have done particularly well in the past year and others have fallen, your portfolio will be skewed towards those outperformers. This increases the risk in your investment pot as it is more heavily reliant on a few investments. While it can feel counterintuitive to sell the stocks that have risen and buy more of the ones that have fallen, that can help ensure your portfolio remains balanced and well diversified.

What you could do next: Work out what you’re investing for and how far away that goal is. Check the risk in your portfolio matches your current risk tolerance, but also work out what you want your ideal portfolio split to be, between assets and countries, and see how close you are to it.

Is the underperformance justified?

If your investments have underperformed, do you understand why? This is particularly important when investing via funds. Every fund manager will go through periods of underperformance, but is it because their sector or investment style is out of favour, or something more specific to the manager? When you buy a fund you may want to understand which market conditions they will likely outperform, and when they will lag the market. On the flip side, knowing this helps you to weed out when a manager has made a series of bad calls and may have lost their edge.

What you could do next: Look at the funds that have underperformed and work out whether it’s down to markets or the manager.

Has an investment become too big?

You might have bought a fund when it was small, but through good performance and other investors adding their money it could have ballooned into a giant fund. That’s fine in theory, but every fund has a limit, and beyond that it becomes harder for them to stick to their investment style and keep finding good investments. There is no golden rule on how big is too big, as it depends where the fund is invested. A global equity fund, for example, will have a larger limit than something investing in UK start-ups or a specific area, such as healthcare.

What you could do next: Check if any funds you own have grown in size dramatically in the past couple of years, and see if any that have ballooned in size have started investing outside their comfort zone (see the fund manager creep below).

Is your fund manager creeping?

Buying funds isn’t a hands-off process and you may want to check the fund managers on any of your funds to make sure they’re doing what they said they would. When markets are volatile, like now, it’s tempting for fund managers to deviate from their investment strategy in order to chase higher returns. In the same way that you don’t go to the fishmongers for a great cut of beef, you bought the manager for their expertise in a particular area, so any move away from that should be a warning signal.

What you could do next: Look at the latest fund factsheet and check the holdings of the fund match what the manager said they’d be doing. If it’s a large-cap fund and they’re investing in lots of small companies, that should ring alarm bells, for example.

Have you been haphazard? Set up regular investing

Log into your account and check your transactions over the past year, they can be very revealing. Have you invested in fits and bursts, when you’ve sporadically remembered to top-up your funds, or are you also someone who forgets all about it until the final day of the tax year when you invest all in one go? If so, you may be better off setting up a regular investment, which means you’re paying money in and investing it monthly.

The big benefit of this is that you don’t need to actively remember to pay money into your ISA and invest it every month, the whole process it automated, which saves you time and hassle. It also means that you avoid attempting to time the market and buy when you think markets are about to rise, which is something even the professionals struggle to do consistently.

What you could do next: Set up regular investments on your platform, for the monthly amount you think you can afford – you could always add to it or tweak the amount if you need to.

Set up regular investing

How much cash do you have?

The current combination of high (and rising) inflation and very low cash savings rates means that any money in cash is making a loss in real terms. Inflation is edging closer to 7% and there are some expectations that it will hit double digits by the end of the year. At the same time the top easy-access cash savings account is paying 1.5% – way below inflation*. It means that any money sitting in cash accounts will be losing spending power – so it’s not a risk free option.

That doesn’t mean you should invest all your cash. You should have enough cash to cover an emergency, between three and six months’ worth of expenditure, and any short-term spending plans, such as a big holiday or a new car. After that you may want to think about why you are holding cash and when you would be comfortable investing it.

What you could do next: Work out how much short-term cash you need, then look at whether you could invest it and in what situation you would put that into the market.

* Source: Moneyfacts

Remember that the value of investments can change, and you could lose money as well as make it. How you're taxed will depend on your circumstances, and tax rules can change. ISA and tax rules apply. Past performance is not a guide to future performance.

These articles are for information purposes only and are not a personal recommendation or advice.


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Written by:
Laura Suter

Laura Suter is head of personal finance at AJ Bell. She is a multi-award winning former financial journalist, having specialised in investments. Laura joined AJ Bell from the Daily Telegraph, where she was investment editor. She has previously worked for adviser publications Money Marketing and Money Management, and has worked for an investment publication in New York. She has a degree in Journalism Studies from University of Sheffield.