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How to spring clean your portfolio

March 2019

Categories: ISA

Spring has arrived early this year and after the turmoil of late 2018, it makes sense to give your investment portfolio a spring clean.

Here are five questions to ask yourself.


If you were starting from scratch, would everything in your portfolio be there?

There is a danger that if you don’t re-examine your portfolio from time to time, you end up with a random selection of yesterday's investment ideas rather than a coherent portfolio that works to meet your long-term goals.

If certain areas have performed very well, they can end up with a disproportionate weighting in your portfolio. Recent years have seen markets dominated by a number of large global technology names. It is good investment practice not to let those names grow to too large a share of your portfolio – with all the associated risks - but to take profits occasionally and recycle the money into areas that might have more growth potential. At the same time, resist the temptation to ‘fall in love’ with companies. Ask yourself whether you would buy it again today, at today’s price.

Resist the temptation to ‘fall in love’ with companies.


Have your circumstances changed?

Your personal circumstances will change from time to time: you may change job or receive a windfall; you may get married, have children or retire. All or none of these may require action, but it should at least prompt a review. If you have a new, better-paying job, you may be able to add more to your monthly savings or you may be in a position to take a little more risk with your capital. If the opposite is true and you’re moving to go freelance, or start a business, you may need to switch to investments that can generate an income to provide support while you find your feet.


Are you likely to need money from your portfolio in the next 12 months?

If you have some big expenditure coming up, this will influence how and where you invest. If you are likely to need capital in the next 12 months, you can’t really afford to take a risk on stock markets, which tend to bounce around in the shorter-term. You should start selectively taking money out of different areas and moving it into cash at least a year ahead of when you need it.


Are your investments working for you?

You don’t want to chop and change every five minutes. It will cost you money in trading fees and probably won’t do your portfolio a lot of good. However, it is worth measuring the investments you hold against the wider market and their peer group to see whether they stack up. If they don’t, consider whether your original investment case still stacks up.


Have you spotted a great opportunity?

Markets have been volatile and, in some cases, good companies have yet to recover. In areas such as the retail sector, even the better companies have been downgraded. At the opposite end, technology stocks now appear to be on more realistic valuations. Amid the rubble, there will be opportunities and it may be a good time to see if you can pick up a bargain.

Author: Cherry Reynard Categories: ISA