Does your portfolio still suit your lifestyle?

There are few things more personal than managing one’s finances. Yet despite how liberating it may feel to hand over responsibility, some hesitation is completely understandable.

In the early days of being a self-managed investor, one can often get by quite comfortably, especially if you are willing to dedicate a significant amount of time and energy towards the process. However, as the competing demands of other areas of life become more pressing, it can be difficult to maintain the same level of commitment.

In these cases, a portfolio could slowly morph into a disjointed collection of yesterday’s sector fads, long-forgotten fund recommendations and previous hot stocks. This hodgepodge of holdings could become increasingly difficult to remedy as time passes and the accumulation of sporadic investments only widens.

Many of these leftover holdings could also be vulnerable to significant price volatility.

It is surprisingly easy for your portfolio to become out of alignment with your current investment needs, risk tolerances or lifestyle objectives. This transition from an active, intentional strategy to a sedentary repository of legacy holdings can go unnoticed for some time.

It may not be until a particular lifestyle or market catalyst that your portfolio’s shortcomings are revealed. The mismatch between its current allocation and the lifestyle it is intended to fund then becomes clear, opening a Pandora’s box of rushed changes and frantic reallocations that may leave you no better off than you started.

Instead, it is usually far better to assess your portfolio regularly. One way to do this is to imagine receiving a one-off lump sum and asking yourself how much of it you would invest in your current holdings. If you would be hesitant to increase your current allocation, this may indicate that it no longer aligns with your investment needs.

Another test is to determine whether your portfolio’s performance differs significantly from its most relevant market benchmark, as a notable deviation could indicate that the portfolio may not be well-balanced or contains exposure to different sectors and geographies.

While encouraging in the short term, significant outperformance relative to the benchmark could indicate that the portfolio is too concentrated and may introduce additional volatility. On the other hand, a portfolio that consistently underperforms and has not kept pace with the benchmark could suggest that the underlying allocation needs to be adjusted.

The journey from a fragmented portfolio to a homogenous, future-proofed structure doesn’t have to be complex – and for those who don’t have the time to do this themselves and don’t need advice, we have developed a more streamlined solution.

The Wealth Club Portfolio Service has been designed to, provide a sensible, long-term alternative to self-management, removing the burden of ongoing asset allocation and fund selection.

This service maintains strict diversification across thirty to forty-five carefully selected funds within each portfolio, aiming to avoid undue exposure to a single asset class or potentially outdated market narrative.

Of course, even with a diversified, long-term approach, investors must be aware that any form of investment will involve accepting a degree of risk, and returns are never guaranteed.

Within the Portfolio Service, investment trusts and overseas listed investment companies are used, typically to provide exposure to Private Equity and infrastructure investments, helping reduce the portfolio’s correlation with major indices and add an alternative source of potential return. However, these alternative assets are high-risk investments and are vulnerable to heightened pricing uncertainty.

These portfolios operate on a non-advised basis. This will avoid the charges involved with a financial adviser, but it does mean an investor must decide which, if any, of the portfolios is right for them.