How to invest How to invest: managing your portfolio

Managing your portfolio

You may need to rebalance your investment portfolio each year to stick to your goals

Once you've found the right asset allocation and picked the right investment portfolio for your needs, you'll still need pick the investment products to fill it out and manage your portfolio throughout the year. 

There are three core issues you'll need to tackle:

1) Choosing the right investment products

One of the last steps you'll take once you've decided on your ideal portfolio will be how to populate it with actual investments. 

The easiest way of doing this is through investment funds, like unit trusts, open-ended investment companies (Oeics), investment trusts and exchange traded funds. They're cost-effective, and allow you to further spread risk compared with investing directly.

Remember, the management costs of your investments can have a big impact on their performance. We suggest you use low-cost tracker funds to fill up your portfolio, although some assets, such as property, may be better suited to higher-cost, actively-managed funds. 

Learn about different investment products, active vs. passive investment and how fund charges eat into your returns with out guide to different types of investment.

2) Buying investment products for your investment portfolio

If you decide to invest alone, without the help of a financial adviser, you can cut the cost of investing in funds by using a fund supermarket or discount broker. These are a hub that allow you to buy investment products and monitor their performance in a one-stop shop.

Because you're doing all the hard work of picking your investment, fund supermarkets and discount brokers reduce the commissions that are payable in certain types of investment funds. Cutting these charges can have a significant impact on the performance of your investment portfolio over the long-term.

Read our complete guide to fund supermarkets, including a Which? rating of each one in the UK market to see how much you could save. 

3) Rebalancing your investment portfolio each year

You’ll need to reassess and rebalance your portfolio annually. Rebalancing is the process of bringing your portfolio back to its original asset allocation. This is necessary because, over time, your investments may fall out of sync with your original asset allocation; this tends to happen when one asset, usually equities, grows quicker than the others.

For example, if UK equities represent 20% of your portfolio at the beginning of the year, but have grown in value to represent 30% at the end, you’ll need to sell some of your UK equity holding and purchase more of an asset that’s underweight to get back to your original asset allocation.

Try to resist the temptation to tinker with your portfolio, and rebalance after six months or a year. The Money Advice Service has some advice on assessing the performance of your investments

This information does not constitute financial advice, but can act as a helpful starting point for a conversation with a financial adviser. Read our guide to financial advice explained to find out how to find one. 

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Last updated:

July 2016

Updated by:

Michael Trudeau

 

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