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Portfolio overhaul  Going through your investments can be a bit like rummaging through an attic of objects collected over the years. Here you find some early privatisation shares, such as BT. There you stumble across some certificates for investment trusts. Next to them you find a more recent addition to the pile of paper: a couple of funds bought in the technology boom of the late 1990s, which you simply could not bear to sell at a huge loss when the bubble burst. So what do you do with this miscellaneous ragbag of investments? First, it is important that you take professional advice before you do anything. Next, it could be as simple as being brutal and just getting rid of the rubbish. Selling is a much underrated activity, which often means that you accumulate a large ‘tail’ of forgotten or poorly performing products that you would have dumped long ago had you been more ruthless. This is often quite hard because many people become emotionally attached to their investments. The question you should ask yourself is: Would I buy this product today? If the answer is no, then you may want to think hard about selling. You should also be honest about whether you are really monitoring your investments or whether you have merely tucked them away in a bottom drawer and forgotten about them. If the latter is the case, then you may need to switch to simpler investments. We can discuss the options available to you based on your own specific requirements. By making disposals at regular intervals, you could avoid the dangers of making a poorly timed single exit. Although tax should not dictate financial decisions, it should form part of the equation. After three years of rising stock markets, many investors are now sitting on sizeable capital gains, some of which are not sheltered within Individual Savings Accounts (ISAs). It’s also important to make use of your capital gains tax (CGT) allowance of £8,800 in this financial year and crystallising some of these gains if appropriate. The profits could then be invested back into the stock market if desired, often in a more tax-efficient way, such as in ISAs or self-invested personal pensions (SIPPs). Investors could also use other methods to minimise any potential CGT bill. This may include applying indexation relief and taper relief to reduce gains and transferring assets to a spouse who has an unused or only partially used CGT allowance for the tax year. Another option could be to make use of losses (perhaps made during the bear market) to set against current gains. Another area to tackle is the balance of your portfolio. Is it too heavily skewed towards certain asset classes? For example, do you have too much money in shares and not enough in more secure investments for someone with your attitude to risk? Or is it the other way round and you are underweight in shares? Is your entire portfolio riding on UK shares or do you have a nice geographical spread? |