Five essential investment checks to make this Spring

Authored on
11 Apr 2023



As the new tax year is here, it’s a good time to check in on your investments and do a little Spring Clean. This once-a-year check-in is good for making sure your portfolio is on track and you’re not carrying any duff investments.

Check 1: Do you still like your investments?

A year is a long time and we all change our minds in that period - the same can happen with investing. Something you thought was great in your portfolio a year or two ago might not look quite right now. The big caveat here is that you don’t want to be swapping and changing your investments on a whim – everything should be done with a long-term view. But it’s entirely understandable that your goals or personal circumstances might have changed, your view on a particular area or sector might have changed, or you might just want to free up some money to invest elsewhere. Take a look at all your investments and check you still know why you’re invested in them, you still believe in them and that they are still right for your goals.

Check 2: Have you become a collector of funds?

While you’re checking your investment portfolio, you want to make sure you haven’t become like a kid in a toyshop, picking up all the funds that catch your eye and chucking them in your portfolio. It’s easy to become convinced on a new investment and add it to the pot, without thinking about whether it doubles up with something you already have or whether it actually adds more diversification.

On the flip side, you should make sure you have enough funds. Often when people start out investing they’ll start with one all-in-one fund or a simple global index tracker while they build up their investment pot. But if you’ve been investing for a while now and have built up a decent portfolio size, you might want to add more investments into the mix.

There’s no hard and fast rule on how many funds you should own, but there are a few checks you can carry out, like how many funds you should invest in.

Check 3: Ditch the losers – or back them!

When you’re looking at your portfolio you’ll no doubt been keenly aware of the investments that haven’t done so well this year. Its never easy to have losers in your portfolio but you need to ask some key questions before you decide whether or not to sell. Mainly, do you still believe in the investment and has it underperformed because the particular area or sector that it invests in has done badly, or has the fund just performed poorly? Here’s some handy tips on how to know whether to ditch your fund manager or not.

If you’ve lost faith in the investment (and don’t think it will bounce back over the long term) then it might be time to sell. It’s tricky to click that ‘sell’ button and lock in a loss, but it might be better in the long run.

However, if you’re still happy with the investment and think it will bounce back you can invest more. This might feel like madness for something that has lost you money, but if you think it’s going to come good then you can look at it like you’re buying it on sale now. This so-called ‘rebalancing’ of your investments every year or so is important to make sure you don’t end up with an unbalanced portfolio. If some investments have done particularly well in the past year and others have fallen, your portfolio will be skewed towards those outperformers. This increases the risk in your investment pot as it is more heavily reliant on a few investments. While it can feel counterintuitive to sell the stocks that have risen and buy more of the ones that have fallen, that’s the theory you should be sticking to.

Check 4: Were you methodical Mary or scattergun Sally?

Everyone starts out the year with great intentions of being really organised with investing, but did you stick to it? It’s a good idea once a year to look back at how you invested and see if there is room for improvement. Log in to your account and check your transactions over the past year – they can be very revealing.

If you have invested pretty randomly, as and when you remembered, it might be a good idea to set up regular investing, which means you’re paying money in and investing it monthly. The big benefit is that you don’t need to actually remember to pay money into your ISA and invest it every month, the whole process it automated, saving you time and hassle. It also means that you take some of the emotion out of investing, as you aren’t logging in and buying or selling in reaction to something that’s happened in markets or in your portfolio.

Check 5: Are you hoarding cash?

While cash interest rates are looking pretty decent at the moment (although still nowhere near sky-high inflation) it’s generally not a great idea to have lots of cash for the long term. The fact that interest rates are less than half current inflation means any money sitting in cash accounts will be losing spending power.

That doesn’t mean you should invest all your cash. You should have enough for your emergency fund and any money you know you’ll need in the next five years, such as a big holiday, moving house or a new car. After that you need to think about why you are holding cash and whether you would be better off investing it.

Remember that the value of investments can change, and you could lose money as well as make it. How you're taxed will depend on your circumstances, and tax rules can change.

These articles are for information purposes only and are not a personal recommendation or advice.