Skip to content

managing a portfolio Tips

Title: 4 Tips for Managing a Investment Portfolio, including Examples

AJ Bell Article: Link to full article below.

An investment portfolio can involve a collection of stocks, bonds, cash, funds and/or investment trusts. Creating and managing a portfolio involves more than just picking good investments as this article explains.

There isn’t a perfect portfolio which will suit everyone, so it is important to construct one which suits your financial goals and risk tolerance.

TIP 1: MAKE A LONG-TERM ASSET ALLOCATION PLAN

Academic research has shown that asset allocation accounts for over 90% of a portfolio’s return. Building a sensible asset allocation plan is therefore key to achieving long term financial goals.

In a nutshell, this involves deciding how much you should put into one area such as shares versus another and then regularly reviewing it to ensure each asset class hasn’t moved beyond your target.

For example, if you had 80% in shares and 20% in bonds and the equity market slumped, you might find the value of your investment in shares has fallen to 70% and bonds have jumped to 30%. At this point you might want to rebalance – something we’ll discuss in more detail later in this article.

Over the years, one popular starting point for asset allocation has been to invest a proportion in bonds equivalent to 100 minus your age. For example, if you are 30, this theory implies you should hold 30% of your assets in bonds and 70% in shares.

This would be a good starting point but it is not set in stone. Often, people younger than 60 might find they want a much higher weighting to equities than is suggested by the ‘100 minus age’ rule. Even someone approaching or just starting retirement might want to have more exposure to equities, albeit focusing on high quality companies.

Read further tips and the full article here…