In the case of old investments, this might be poor, even negative returns, charges you didn’t know about or difficulties accessing money to move it somewhere better. Here are some ways to lessen that pain barrier between you and keep your investment portfolio fresh.
Whether you’ve been in the investment game a while or are quite new to it, there’s a tendency to let fear of the new get the better of us and just stick with what we know, even if it isn’t very good, because “better the devil you know”.
But this attitude is the friend of poorly performing fund managers who have to do very little to earn a lot. Face your fears – commit to moving money out of poor performers and into funds or stocks that show a bit more promise.
There’s millions of pounds of research going into a field of study called behavioural finance. Lessons learned here can be of benefit to investors because, by applying psychology to money, you can find out which elements of your own behaviour and attitude are holding back your ability to grow a healthy portfolio.
Risk aversion is the best-known example of this, but there are others, such as your parents’ attitude to money and how it affects your own, which are all useful insights.
What do you do with those insights? Well, if you discover that you invest everything in large UK retailers because that’s what your Dad did, it might be worth acknowledging that, and doing some research into less familiar sectors.
We live in interesting times – and some stocks and shares are reflecting this in their share prices.
To avoid nasty surprises, it’s a good idea to give your portfolio a cursory check at least once a month and an in-depth check once every three to six months.
Too frequent, and your stress levels will rise. You might even be tempted to make snap decisions that you will later regret. Not frequent enough, and you run the risk of disengaging completely from what your money is doing.
Ignorance is not bliss. But you need to choose the information that you act on carefully. Good reasons to re-consider your holding would be a poor long term outlook for that asset class or market, or an alternative investment that you have just discovered that is more compelling to you.
There is a lot of noise in the run up to the April ISA deadline from fund managers and there can be a tendency, when under time pressure to invest, to go with whoever shouts loudest. There might be very good reasons for the amount of attention they are getting – or it might be over-compensating. Popularity is not the best indicator of performance.
There are fund managers, there are colourful graphs and charts and there is slick marketing material. But you’d be surprised by how many investors don’t have a clue what companies they are actually investing in within the fund. Fund platforms usually display at least the top ten holdings of a fund on their main information page.
Depending on your research appetite, it’s a good idea to check through the entire list of holdings (usually downloadable). Even if you don’t know many of the companies, you can satisfy yourself that you at least know who and what is in receipt of your money, so that if relevant events catch your eye in the news, you can check to see how or if your fund manager is responding, by looking at how the holdings are changing.
There is no objective answer to the question “what is a good return”? However, there are some ways to measure it – against the benchmark for funds or stocks in that sector, against inflation (currently quite high) and against your own expectations. Keep in mind that returns differ over different time periods. Some funds, particularly those with a focus on companies demonstrating good, long-term governance, might demonstrate lower annual returns, but greater consistency over longer-terms of five to ten years. A long-term, decent return approach from a fund manager is the type of strategy that can help you sleep at night, even if it doesn’t lend itself to showing-off at dinner parties.
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Selftrade does not provide investment advice. This article is the authors view and is not the view or opinion of Selftrade and Selftrade accepts no liability for any loss caused as a result of the use of this information. The opinions expressed are those of the author at the time of writing and should not be interpreted as investment advice.
The value of investments can fall as well as rise and any income from them is not guaranteed and you may get back less than you invested. Past performance is not a guide to future performance. We do not provide advice or make recommendations about investments. If you have any doubts about the suitability of an investment, you should seek advice from a suitably qualified professional adviser.