The Scottish Mail on Sunday

4 tactics to help keep your in­vest­ment port­fo­lio on track

Don’t let the shock­waves from the Elec­tion re­sult un­bal­ance your fi­nances... here’s our es­sen­tial guide

- By Holly Black

AL­THOUGH Fri­day’s Gen­eral Elec­tion re­sult did not shock mar­kets into a freefall (see panel, right), any ma­jor po­lit­i­cal or eco­nomic event is a good ex­cuse to check up on your in­vest­ments.

Ex­perts preach the im­por­tance of in­vest­ing for the long term, pick­ing your in­vest­ment funds and shares and leav­ing your money where it is. But it is equally im­por­tant to check in oc­ca­sion­ally to see how your in­vest­ments are pro­gress­ing and whether any fine tun­ing is nec­es­sary.

Here are four is­sues in­vestors should con­sider in mak­ing their in­vest­ment port­fo­lios fit for pur­pose.


JUST be­cause you in­vested some money, it does not mean you can­not add more. In­vest­ing money in small, reg­u­lar amounts has been proven time and again to be more ef­fec­tive than in­vest­ing a large lump sum all in one go.

Not only is putting a reg­u­lar amount aside each month eas­ier on the purse strings, it is a safer way to in­vest too. This is be­cause savers who take this ap­proach ben­e­fit from some­thing the pro­fes­sion­als call ‘pound-cost av­er­ag­ing’ when mar­kets are tur­bu­lent.

It means that over time you end up buy­ing more units in your in­vest­ment funds when prices are low and fewer when prices are high, so you ben­e­fit over the long term. Fig­ures from in­vest­ment house Fidelity show that some­one who in­vested their an­nual tax-free Isa al­lowance in reg­u­lar monthly in­stal­ments over the past ten years would have made £6,000 more than some­one who in­vested the whole lot on the last day of each tax year.

In both cases, if they used their Isa al­lowance fully over the past ten tax years, they would have in­vested a to­tal of £110,560.

If they had in­vested each year’s al­lowance into the FTSE All-Share In­dex in one lump sum on April 5 each year, their Isa pot would have grown to a tad over £158,500. But some­one who in­vested the same sum but spread over the year via monthly pay­ments would have seen their in­vest­ments grow to just over £164,500.

Lump-sum in­vest­ing runs the risk that the stock mar­ket could fall the next day af­ter an in­vest­ment has been made, tak­ing your sav­ings with it. Set­ting up a reg­u­lar pay­ment takes the emo­tion out of in­vest­ing.

Ja­son Hol­lands is man­ag­ing di­rec­tor of fi­nan­cial ad­viser Til­ney. He says: ‘What hap­pens is that when the stock mar­ket is soar­ing, in­vestors be­come bold, they in­vest more and start tak­ing risks. Then when the mar­ket falls they panic sell, when re­ally that is the time to in­vest more be­cause share prices are cheaper.

‘Reg­u­lar in­vest­ing in­stils a great dis­ci­pline to keep on in­vest­ing, through both good times and bad, when your in­stincts might tell you oth­er­wise.’

You can set up a reg­u­lar in­vest­ing ac­count through any fund su­per­mar­ket, such as Har­g­reaves Lans­down, Fidelity or Til­ney Bestin­vest. You can in­vest as lit­tle as £25 a month into a choice of in­vest­ment funds, in­vest­ment trusts or low-cost ex­change traded funds.


THE Govern­ment still en­cour­ages peo­ple to save long term. This is done by pro­vid­ing tax re­lief on con­tri­bu­tions into pensions and en­abling in­vestors to build tax-free in­vest­ment in­side an In­di­vid­ual Sav­ings Ac­count.

When­ever you start in­vest­ing or de­cide to top up your in­vest­ments, your first port of call should be to utilise th­ese tax-free al­lowances.

In the cur­rent tax year, which runs from April 6, 2017 to April 5, 2018, savers can put as much as £20,000 into an Isa. They can also make an­nual con­tri­bu­tions into a pen­sion up to £40,000 – al­though this limit also in­cludes any em­ployer con­tri­bu­tion.

Be­sides pensions and Isas, there are other in­cen­tives to en­cour­age long-term sav­ing. In­vestors have an an­nual cap­i­tal gains tax al­lowance of up to £11,300, which means prof­its on any share sales up to this limit are tax-free. Also, in­vestors cur­rently en­joy an an­nual tax-free div­i­dend al­lowance of £5,000.

Tom Becket, chief in­vest­ment of­fi­cer at Psigma In­vest­ment Man­age­ment, says: ‘As an in­vestor, it is ab­so­lutely vi­tal to take ad­van­tage of your Isa, Ju­nior Isa and your Life­time Isa al­lowance, as well as your pen­sion al­lowance every year.

‘Sav­ing money into th­ese taxfriendl­y ve­hi­cles is in­creas­ingly im­por­tant as more peo­ple are go­ing to have to stand on their own two feet in re­tire­ment in the fu­ture.’


IT SOUNDS like a com­pli­cated in­vest­ment term, but all re­bal­anc­ing means is check­ing to make sure your in­vest­ment port­fo­lio is pro­gress­ing as you want it to.

When you start in­vest­ing you might have, for ex­am­ple, 50 per cent of your money in stocks and shares and 50 per cent in bonds.

But if the stock mar­ket plunges and bond prices rise, the value of your in­vest­ments will change and it will al­ter those pro­por­tions. With­out hav­ing made any changes to your in­vest­ments you might now have 30 per cent of your money in shares and 70 per cent in bonds.

So in­vestors should be sure to check their port­fo­lio, just once or twice a year, to make sure they are still happy with it and to check whether any re­bal­anc­ing is nec­es­sary.

Maike Cur­rie is in­vest­ment di­rec­tor at Fidelity. She says: ‘Once your pen­sion or Isa is set up you should not just ig­nore it. Per­son­ally, I try to re­visit my in­vest­ments per­haps every six months to a year to check they are still in line with my goals and the amount of in­vest­ment risk I want to take.’

But re­bal­anc­ing can be dif­fi­cult. It may mean tak­ing money out of in­vest­ment funds that are do­ing well and putting more into those which have not per­formed so im­pres­sively.

But be­ing dis­ci­plined and stick­ing to such a strat­egy will get you an ex­tra boost in the same way that reg­u­lar sav­ing does. You are in ef­fect

tak­ing prof­its from in­vest­ments when they are ex­pen­sive and buy­ing al­ter­na­tive funds or shares when they are cheap.

As you get older it is also ad­vis­able to con­sider chang­ing your mix of in­vest­ments, tak­ing money out of riskier funds into safer ones or those which pay a reg­u­lar in­come.

Psigma’s Becket has been tak­ing money out of Ja­pan re­cently. He says: ‘I had in­vested 4 per cent of my own port­fo­lio in Ja­pan, but over the past four months the Ja­panese stock mar­ket has risen 20 per cent, so the pro­por­tion of my money in the coun­try’s stock mar­ket had in­creased to 5 per cent.

‘So I have taken some profit to get back to the orig­i­nal 4 per cent I had in­vested in the re­gion.’

Re­search by Fidelity shows that if you had in­vested £1,000 in 13 dif­fer­ent as­sets, in­clud­ing gold, UK shares and cor­po­rate bonds for ex­am­ple, and left your money alone for 20 years you would now have a port­fo­lio worth just short of £53,000. But if you had re­bal­anced your hold­ings every year to equal lev­els again your money would have grown to nearly £58,000.

Fidelity’s Cur­rie in­vested in a US tracker fund in De­cem­ber 2015, which has risen al­most 50 per cent since then.

She says: ‘As a re­sult, the pro­por­tion of my sav­ings which are in the US has been skewed so I am go­ing to take some prof­its and put them into my gold in­vest­ment fund.

‘I am con­cerned about ris­ing in­fla­tion in the UK and gold is a good shel­ter against both in­fla­tion and un­cer­tainty.’


JUST as you shop around to make sure you are get­ting good value for money on your gro­ceries or a new TV, you should be sure to check that you do not pay over the odds when buy­ing funds or hold­ing them on an in­vest­ment plat­form.

When pick­ing an in­vest­ment fund, check how its per­for­mance and charges com­pare with com­petiuty tors. The most im­por­tant fig­ure is the ‘on­go­ing charge’, which is de­tailed on the monthly fact­sheet is­sued by the in­vest­ment house be­hind the fund. This is ex­pressed as a per­cent­age and shows how much the fund charges to pay for ev­ery­thing from the man­ager’s salary to the cost of buy­ing and sell­ing shares. So, if you have £10,000 in a fund which charges 1 per cent, an­nual costs equate to £100. But while cost is im­por­tant, it should not be the only is­sue an in­vestor fo­cuses on. Richard Cham­pion, dep- chief in­vest­ment of­fi­cer at Canac­cord Ge­nu­ity, says: ‘There is noth­ing wrong with pay­ing a lit­tle bit more for a fund with a proven track record for de­liv­er­ing good re­turns.’

He avoids any in­vest­ment funds where the man­ager re­ceives a per­for­mance fee, as th­ese can in­cen­tivise them to not in­vest for the long term and can eat into in­vest­ment re­turns.

Psigma’s Becket says: ‘If a fund man­ager goes out to repli­cate the per­for­mance of the FTSE 100 In­dex, then you might as well just buy a low-cost tracker fund.

‘But pay­ing for ac­tive in­vest­ment man­age­ment can be worth­while if you are in­vest­ing in a par­tic­u­lar spe­cial­ist theme – such as tech­nol­ogy – or re­gion, such as emerg­ing mar­kets.’

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 ??  ?? WATCH­FUL: Maike Cur­rie reg­u­larly checks her port­fo­lio
WATCH­FUL: Maike Cur­rie reg­u­larly checks her port­fo­lio

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