New decade, time for a portfolio check-up

27/01/2020

When did you last check if your investments reflect your goals?

Many of us start the new year with financial resolutions to spend less and save more. Worthy goals, of course, but it could be just as valuable to take stock of the savings and investments that you already have to your name.

Glossary

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Over our lives, we can accumulate a hotchpotch of investment accounts with different companies and a number of pensions from different employers.

If this sounds familiar, there is an important question for you to answer: are your investment goals the same today as when you chose your investments?

At a glance, this may seem a daft question. After all, aren’t all investments made to make money? The reality is more complicated, though, as there is such a wide range of investment assets and strategies. Some will carry more risk of losses than others. And some can deliver an income, while others will not.

By dusting off the paperwork and looking at your portfolio of investments, including those you have with M&G, you can check whether they continue, individually and collectively, to suit your financial goals.

Reasons to review your portfolio

If it has been several years, or even decades, since you chose how to put your investments to work, it will probably be very worthwhile checking in with those accounts.

Importantly, this should not just be an exercise to see if your investments have gone up in value or not. Since the purpose of your review should be forward-looking, you need to look beyond past performance. Instead you should reflect on the types of investments you hold, the levels of risk they carry, and how they fit together.

Here are some of the main reasons why a portfolio health check could be a good investment of your time.

  • Aligning your investments — It is natural that our financial aspirations evolve over time, shaped by our circumstances. For instance, while you may in the past have had a singular focus on growing your assets, it may now be more appealing to draw an income from your investment pot. In this event, certain assets will probably be better suited to deliver a reliable income than some of those you hold. If you invest in funds like M&G’s, you should reacquaint yourself with what they are respectively managed to deliver. Each fund will have its own stated objective, and will invest in a combination of assets to achieve this. Any fund you invest in should resonate with your personal goals
  • Keeping risk in check Your comfort with investment risk may also have fallen. As we get older and rely more on our savings than employment to meet our financial needs, the possibility of short-term losses can feel less palatable. If you are now more concerned with navigating uncertainties than growing your capital or income, it is important this is reflected in the investments you hold. De-risking your portfolio over time could involve selling down higher-octane investments and moving towards alternatives that carry a lower risk of short-term losses, albeit sacrificing some potential long-term gains
  • Rebalancing your portfolio — Even if your financial goals and attitude towards risk remain unchanged, there is still good reason to lift the lid on your investments. This is because over time, market fluctuations can move the allocation of your assets away from what you had in mind. To be more specific, those investments that have performed better than others will account for a greater share of your portfolio’s value than when you last checked. While you may be very comfortable with this, it is important that your investments are allocated in a way that reflects your goals and circumstances. Rebalancing occasionally can help ensure you are well diversified, and reduce the chance of any single failure compromising your financial prospects

Getting an expert opinion

If you are unsure about the suitability of any of your investments, or how to best structure your portfolio, you should consider seeking financial advice.

Speaking to a financial adviser can play a valuable part in defining an up-to-date investment plan, unique to your goals and needs. Here are some of the things you could discuss to help identify an investment strategy that suits your goals:

  • Define your needs — what do you really want from your investments?
  • Identify your time horizon — how long is it until you need to realise your investments and might you need to access them?
  • Establish your appetite for risk — how much could you afford to lose?
  • Discuss which investments can best complement your other savings, any other income streams, and other assets like property

Remember, M&G are unable to give financial advice. The views expressed here should not be taken as a recommendation, advice or forecast.

The value and income from any fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise. There is no guarantee that any fund will achieve its objective and you may get back less than you originally invested.