This week, we’re going to be talking about how to review an investment portfolio. Those of us who have some money set aside need to keep an eye on it to make sure it continues to do the job we intend for it. Needless to say, this is about more than just performance, so stay tuned to find out everything you need to know and everything you need to do when reviewing your investments

Introduction

If you have money put away for the future, it needs looking after. One thing is for sure, any portfolio left to its own devices will, over time, veer from the path which it was intended to run on. Asset allocations get out of kilter, funds which were once hot become dogs – you get the picture.

But the key thing to understand is that investment performance is about much more than investment performance. Confused? Let’s look at what you need to know first…

 

What you need to know

1 – A portfolio is not a financial plan
It’s just a tool which is intended to help realise the plan

2 – Outperformance is not a valid goal
‘To get richer’ is a pathetic goal. You need to understand what you’re aiming for

3 – Benchmarks are bunk
They only help the fund management industry

What you need to do

1 – Ask Why?
Why has the performance been what it was? Systemic issues or fund problems?

2 – Look at the balance of the portfolio
Rebalance where necessary.

3 – Review the costs.
Layers of cost: Platform, plan, fund and advice. Are you getting value? Don’t forget tax – it’s a direct cost

4 – Keep calm and carry on
Those who react too quickly, lose. Instead, try to keep everything in perspective

Summary

The four action steps above are exactly what I do when reviewing portfolios with clients. Sometimes, depending on the client, I’ll do this work beforehand, make notes for my file, and then the conversation with the client will be very cursory indeed. Others do want to know the detail behind the performance figures.

But I will always be at pains to reaffirm my belief that if a portfolio is intelligently set up in the first place, with passive funds underneath a multi-asset allocation, it should need precious little adjustment over time, other than rebalancing.

People first, money second, always