One of the most common pieces of investing advice is to just ignore your investments rather than checking them every five minutes.
But there’s an opposite end to this spectrum. It’s one in which you’re so hands-off with your portfolio that you could be doing yourself a disservice. Here’s what you should do from time to time to make sure you’re getting the most out of your money.
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Four things you need to check with your investments
Consider this exercise a periodic check-up on your portfolio. Letting things tick over in the background is a great long-term plan. But an occasional tune-up is advisable to keep your accounts running at peak performance.
Here are four important steps you can take to make sure you’re on top of all your investments:
1. Review your platform
Times change and so do share dealing accounts. What may have been a great platform a few years ago may not stack up well compared to the latest offerings.
Take a look through your platform and make a note of the conditions and charges. Then see how your account compares to our top-rated share dealing accounts. We’ve done a deep dive on some of the best brokerages out there to save you from having to research each one individually.
Do a straight apples-for-apples comparison and see if you would be better off with a new platform. High fees and commission costs can really eat into your long-term gains as an investor. So make sure you’re keeping your portfolio in the place that’s going to treat you best.
2. Check you’re using the right type of account
You may not have been aware of this when you originally set up your account, but you can actually swerve paying tax on the majority of your investments if you’re smart.
By using a stocks and shares ISA instead of a general investment account, you can invest up to £20,000 each year without incurring a tax bill.
If you’ve not checked on your investments for a while, you’re clearly a long-term investor, which is excellent! But it also means you stand to benefit even more by making sure you reduce any potential tax liabilities on your gains.
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3. Take a look at the gains and losses of your investments
An investment you made years ago might have seemed great at the time. For example, you may have been renting movies every weekend and thought, “Gee, this is a great business model! I’m going to buy some Blockbuster stock!” Then, just a few years later, Netflix streaming comes along and completely changes the game.
The point is, there might be some crusty old investments that you need to clear out of your portfolio. When it comes to investing, you’re not going to pick winners all the time.
But there comes a stage when you have to cut your losses and move on to bigger and better investment options. Similarly, you might have some top performers that you want to take profits from and reduce your position. Without doing a quick check-in, you’re running blind.
4. Make sure your investments are diversified
Along with evaluating the winners and stinkers knocking around your portfolio, you need to check there’s enough diversification.
If you fail to diversify, you could leave yourself at risk. The best way to diversify is different for everyone, but try to ensure you’ve got a range of assets from a variety of industries.
Investors who left all their money in tech likely got wrecked during the bursting of the dot-com bubble. Don’t allow your own portfolio to become a cautionary tale.
The best way to secure your wealth against nasty upsets is to make sure you don’t have all your eggs in one basket. Making gains with investments is never guaranteed but a diversified portfolio is a great way to try and mitigate a total wipeout.
Please note that tax treatment depends on your individual circumstances and may be subject to change in the future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
