Five New Years Resolutions

Posted by Adrian Lowcock in Portfolio management category on 31 Dec 19


Investors too often focus on the short-term noise, reacting to events. This can have a negative impact on your investments, as you make decisions based on the situation in front of you instead of focusing on what matters most, the longer term. The New Year is a time to take stock. Think about the reasons you invest, what you are trying to achieve, and what your portfolio should look like.

Whenever you make a change to your investments, whether that is adding more money or selling an investment there are some things to consider before you take action:-

    1. Only buy something that fits into your portfolio - Fund ideas and recommendations in the papers are not usually specific to individual investors. Therefore, it is important to think about how a new investment would fit into your portfolio. Ask yourself how it will affect the amount of risk you are taking, liquidity and diversification. Don’t be easily lured by any recent strong performance, instead do some research and check if the fund is likely to help you to meet your goals.
    2. Diversification - This is one of the fundamental principles of investing and it is about ensuring you have the right mix of assets in your portfolio. Diversification can reduce the impact if one or more of the investments in your portfolio perform badly. Make sure you have a mix of bonds, equities, and commodities etc. that match the amount of risk you are willing to take.
    3. Review your investments - A surprising number of investors do not do this and instead they just keep adding new funds to their portfolio until it becomes complex and unmanageable. It’s important to give your portfolio an annual spring clean. Reviewing your investments means you can keep on top of their performance and only hold funds that help you achieve your goals.
    4. Don’t try and time the markets - Emotions drive many investor’s decisions, leading them to sell or buy investments at the wrong time. It is human nature to tinker and to try and outsmart the market. However, all too often timing the market goes wrong and investors either sell out at the bottom or miss additional gains. If you don't try to time markets and remain invested then you are less likely to be influenced by your emotions.
    5. Use your annual allowances - The best way to grow your savings is to add more money, using as much of your ISA & pension allowances as possible. You can add a lump sum or top-up through regular savings. Importantly, both ISA & pensions offer attractive tax benefits, which can give a valuable boost to your savings and investments.