It is essential to review any investment portfolio, along with your current financial position, short-term needs and longer-term aspirations on a regular basis.
As with financial planning in general, it is simply not possible to create a suitable and effective investment portfolio which never needs to be reviewed and adjusted because, for example, as financial markets move up and down, as your goals vary and as your personal circumstances change, it may be appropriate to adjust the nature and risk profile of your portfolio and redefine your investment strategy as a whole.
As part of your annual review process, we will consider and discuss with you what changes might be made and whether a strategic 'rebalancing' exercise would be prudent.
Rebalancing should take place where the asset classes you hold within your portfolio have moved away from the levels with which you are comfortable in terms of your risk profile, or where they are no longer compatible with your investment objectives.
To illustrate this point, if your original portfolio was comprised of 50% equities (higher risk investments) and 50% fixed interest securities (lower risk investments), because this was likely to help you achieve your investment objectives at a level of risk with which you were comfortable and nothing of any great significance had changed since your last review, these are likely to still be the ideal asset class splits to maintain.
However, if fixed interest securities had performed a little poorly over the last year, such that they now represented 40% of your portfolio, whilst equities had performed very well over the last year, such that they now represented 60% of your portfolio, the effect would be that the overall risk profile of your portfolio was now incorrect for both your comfort and your objectives. Therefore, it would be sensible to adjust each of your respective holdings back to 50% of the total value of your portfolio, as they were before.
Not only does this approach help to maintain an appropriate level of investment risk, it actually has the effect of encouraging you to realise profits when a particular asset class has risen in value and buy more of a particular asset class when it has fallen in value - or in other words, to 'buy low and sell high', which is an established and sensible investment methodology.
As part of our ongoing service, we help to ensure your portfolio remains appropriate for your needs, objectives and risk-profile and that you continue to focus on the fundamental investment principles which are proven to be the cornerstones of a successful approach to financial planning.


