Investing fundamentals #5 – Review regularly

In the fifth in a series of blogs about the ten fundamentals of investing, I look at why investors should review their portfolios on a regular basis.

Keeping your investment portfolio under regular review is essential. Things change over time and your investments might need to change to reflect this.

One of the most important reasons for this regular review is the natural changes which will occur with the underlying asset allocation of your investments, and therefore the amount of risk you are taking with your money.

Because one asset class will outperform another over time, the composition of your investments will change regularly. This could leave you overexposed to a particular investment type and therefore taking more risk than you originally planned.

Your investment goals and objectives will also change over time. Keeping your investments under review means you can realign your portfolio to keep it in line with what you are trying to achieve with this money, taking more or less risk depending on how your goals have changed.

Review regularly

Other events can prompt a review of your investments. Fund managers occasionally resign or are replaced, and this should trigger a review of whether the fund remains suitable.

Changes to the objectives of a fund or periods of poor performance should also cause you to consider whether to ‘hold or fold’ a particular fund.

It makes sense to review your investments at least once a year, or on an ad-hoc basis should the fund manager change. What you should seek to avoid is reviewing your funds on too regular a basis, as this can result in kneejerk reactions to short-term events rather than sticking to a long-term plan.

Read all about all ten investing fundamentals by downloading our free guide:

The Investing Fundamentals Guide 2014