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The clocks went forward on the 31st March which means that spring is officially here! Many people use this time of the year as an opportunity to declutter their homes and organise their lives. But, have you ever thought about doing this with your investment portfolio?
Your ‘portfolio’ refers to the collection of different investments that you have. Over time, it is normal for your portfolio to become ‘unbalanced’ and in need of a little refresh.
Here, we will share 5 tips to give your portfolio a spring clean to make sure that it aligns with your current goals.
What is ‘spring cleaning’ your portfolio?
The benefits of re-evaluating your investments
5 ways to spring clean your investment portfolio
What is ‘spring cleaning’ your portfolio?
Spring cleaning isn’t just for your home. It can also mean tidying up your investments.
Spring cleaning your portfolio means checking your investments and changing them as needed. This ensures they match your financial goals and how much risk you want to take.
Doing this helps to make things simpler, diversify better, and grow your money’s potential.
We have discussed the importance of adjusting your portfolio before in our 5 tips to make better investment decisions.
Adjusting an investment portfolio looks different for everyone. For some investors, it might mean selling a few stocks that no longer match up to your goals. For others, this might mean going back to square one and rethinking your whole investment strategy.
The benefits of re-evaluating your investments
Checking your investments often comes with many benefits.
Simplify your portfolio
First, it allows you to simplify your portfolio by cutting down the number of things you have invested in. This makes it easier to manage and balance your investments. When you look through your investments you might find that you have bits and pieces of money all over the place. During your investment spring clean you might decide to consolidate a few or move most of your investments onto one platform rather than having them spread over several.
Reach your goals
Doing a spring clean of your investments also helps in another way. It lets you find and sell investments that do not meet your goals anymore. This lowers the risk of keeping investments that are not doing well. Plus, you can look for new investment options that might fit your goals better.
Stay up-to-date with the market
By looking at your investments once a year, you can keep up with the market. You can make changes to your portfolio as needed. This way, you can make smart choices and grab chances as they come. It keeps your portfolio up to date with the market and your needs.
However, remember that investing is a long-term game. Don’t sell or move because of panic. If you put money into something originally because you felt it would do well in the long-term, then give it that time to breath and grow. A year, or even two or three years, is a short time for investments to move. Given them longer than that before you decide to ditch them.
A word about fees…
Before you go ahead and spring clean your investment portfolio, it is also important to be aware of the fees that come with buying and selling stocks.
Some investment platforms charge fairly hefty fees to let go of assets, which can make the process of investment pruning expensive!
You should always educate yourself about the fees involved and consider how these could affect your capital.
5 ways to spring clean your investment portfolio
Spring cleaning your investment portfolio is key. It ensures that your investments fit your goals and risk level. By checking and changing your investments often, you can make your portfolio stronger. It becomes simpler and might even give you better returns (although this is never guaranteed!).
Here are five smart ways to spring clean your investment portfolio.
1. Reassess Your Goals
The first step is to take another look at your long-term goals for investing. Have these changed from when you very first started buying stocks and shares?
If they have changed, it might be time to make a new investment strategy that will improve your chances of reaching them.
If your goals haven’t changed, you should evaluate whether or not your current portfolio has a chance of reaching them. It is normal for the performance investments to fluctuate and assets that once matched your goals might not do so anymore.
2. Determine Your Current Risk Appetite
Your risk appetite refers to the level of risk you are willing to take on in your investment portfolio. It determines the amount of volatility and uncertainty you are comfortable with when it comes to your investments.
High-risk investments often come with higher potential returns but equally high potential losses.
On the other hand, low-risk investments may not offer the highest returns but are often more stable and require less ongoing management.
Determining your current risk appetite is essential as it helps you align your investments with your financial goals and personal preferences.
Assessing your risk appetite
To assess your risk appetite, you need to evaluate your financial situation. You should never invest more money than you can afford to lose however, some investors may be able to take a slightly higher risk than others.
This may be the case if you have a stable income and spare cash to invest. If you have a long-term investment goal, you might be more comfortable with a higher risk appetite as you have more time to recover from market downturns.
However, if you cannot afford a big loss, you should stick to low risk investments.
Another important part of risk management is assessing whether or not you can deal with the emotional impact of a potential loss.
Some individuals can handle the ups and downs of the market without feeling anxious or stressed, while others may feel more comfortable with a lower risk portfolio that provides stability and peace of mind.
3. Sell Investments That Don’t Match Your Goals
Find investments that don’t fit your goals or risk anymore. Check how they are doing and how they might perform in the future. You can do this by conducting fundamental analysis, reading stock market news, and reviewing expert predictions.
If there are no upcoming events that could cause the value of the investment to go up, and it no longer fits your goals, think about selling. This frees up money for better investments.
You could also consider selling investments that have made significant profits. This way, you can reinvest the cash into other stocks and shares.
4. Try Something New
One of the best ways to refresh your investment portfolio is to try something new. This means adding a new type of asset to your portfolio.
For example, an investor who has always invested in growth stocks might consider investing in value stocks.
Adding new investments to the mix is a good way to diversify – you know how much we love diversification here at MoneyMagpie! Holding a diversified portfolio can reduce your risk of suffering a huge loss if one investment goes down.
5. Reinvest Your Profits
If you have made any profits from investing over the past year, put it back in wisely! Put the money into assets that fit your goals and risk level.
Reinvesting your profits back into the stock market can help to compound your returns over time.
If you invest in dividend stocks, you might want to consider automating this process. Some online investing platforms give investors the option to automatically reinvest the interest from dividends.
Extra tip…
So far, we’ve shared five tips for spring cleaning your investment portfolio in 2024. But if you’re really are keen to really spruce up your portfolio, here is an extra tip for you!
As well as adjusting your investments, it might be worth assessing the investment platforms that you are currently using.
A lot of people use different platforms for different types of investments. It might be helpful to tidy this up and try to keep everything in one (or just a few) place. Doing this could make it easier to manage your investments throughout the year.
However, as we mentioned above, selling your investments can come with fees. Before making any changes to the platforms that you use, make sure that leaving your existing investment platforms won’t eat too much into your wealth.
By taking the time to assess your investments and make necessary adjustments, you can ensure that your money is working for you. Whether it’s reallocating funds to promising new opportunities or cutting ties with underperforming assets, regular portfolio spring cleaning allows you to optimize your financial future.
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