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Financial fitness - Step 4: Review your results

08 March 2017

Equipped with a portfolio of investments and the tools to achieve your goals, your financial fitness regime should now be well underway. However, you can’t just sit back and relax, or your efforts could go to waste. In the fourth and final part of our series on becoming financially fit, we explain why it’s vital to regularly review your investments so you can be certain your money is working as hard as possible for you.

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek independent advice.

What you’ll learn:

  • Why you should regularly review your investments.
  • How you may need to rebalance your portfolio if you are overweight in one particular area.
  • How reinvesting dividends could potentially help you reach your target sooner.

When investing, it’s vital not to become complacent. Any smart investor will tell you that regularly reviewing your portfolio is important so you can monitor your results and get back on track if you lose your way.

Examine your fitness levels

While it’s important not to get side-tracked by every market movement, and to try to commit to your chosen investments for the long term, you still need to check on your portfolio’s health. If you don’t monitor your investments, you may miss out on opportunities in the market, or end up holding poor-performing investments until they’re worth very little or nothing at all.

The importance of asset allocation

When reviewing your portfolio, remember to look at whether it remains properly diversified.

Your money should ideally be divided among assets that behave differently to each other – that is, their value doesn’t tend to move in the same way, be that up or down, at the same time. You may find that over time your asset allocation changes simply because some of the assets you’ve invested in do better than others and end up as a larger part of your portfolio. If you find that you’re over-invested in one asset class or sector it may be time to reduce your investment in certain holdings and put your money into different areas.

Find out more about asset allocation 

If you’re unsure, seek professional financial advice.

Review your investment goals

Remember that your circumstances and investment goals can both change over time, so when you revisit your financial plans, make sure you’re still on track to meet your target.

Our Life Planner tool can help you work out whether you’re on course to meet your goals by projecting how your savings or investments could potentially perform in the future. You need to remember that projections are never a predictor of future performance, and the indicators our tool provides are intended as an aid to your decision-making. They shouldn’t be taken as a guarantee or forecast, or as a recommendation.

If your investment goals appear out of reach, think about some of the different ways you can improve your chances of achieving them. Can you, for example, afford to invest a little more each month? Could you cut back on any unnecessary expenditure so you can do this?

Alternatively, you may want to consider rethinking some of your goals. For example, if you’re saving for retirement, might you be able to continue working for a couple of years longer than you’d originally planned? Don’t be afraid to amend your targets over time, or your approach to achieving them.

Boost your returns

You may be able to achieve your investment goals sooner by reinvesting any income you earn on your savings and investments, as this will enable you to benefit from compounding.

Essentially, this means that any dividends paid are added to your original investment, with the hope that both these and your initial sum will generate growth in future. Bear in mind that returns from dividends aren’t guaranteed.

Remember investments should be held for a long-term period, at least five years, but preferably longer. Staying focused on your objectives and regularly reviewing your results can help you keep on the right track and maintain your financial fitness. No matter how much you diversify your investments and how long you hold them for they can still fall in value and you may get back less than you invest.

In case you missed it, you can see Step three: Put your plan into action and Step two: Stay on the right track, or start from the beginning with Step one: Set your goals.

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