11 tips for a streamlined portfolio

Gleaned from Jason Butler, Gavin Haynes, Jason Hollands and Nick Hungerford (and following on from our analysis of how to become a better investor), Money Observer has rounded up some top tips to spruce up your investments.

Set your goals

Having a clear idea of what you hope to achieve from your investments will help establish an idea of your timeframe, how much risk you can take and therefore where you should be invested.

Take a long-term view

What counts as "long term" can vary, but think a minimum of five years for equity investments and a decade for significant sums invested in more speculative areas such as emerging markets.

Your risk tolerance

As a guide here, consider risk measures such as "drawdown" - how much money you could lose in one go - and "volatility".

How bumpy a ride can you stand? Remember also the risk attached to "cautious" investments - that your returns will not keep up with inflation and costs.

Asset allocation and diversifying

Look to achieve an appropriate balance in your portfolio with a range of complementary investments that can perform differently at different times.

Regular portfolio reviews

This should help ensure new opportunities are accessed and any "rubbish" is binned. Inconsistency and failing expectations may be signals to sell a fund, as could a change in management.

Rebalance regularly

This involves selling part of holdings that have outperformed due to market moves, and adding to those that have fallen, so you maintain your preferred asset mix and risk/reward objective.

Take profits

People are often reluctant to sell their favourite investments, but the cyclical nature of markets means it is an important discipline to take some profits when funds have performed strongly.

Reinvest dividends

The last 20 years saw the FTSE All-Share rise 92% in price terms yet, if dividends were reinvested, the total compound return over that time would have been 273%.

Maximise tax breaks

The taxman does not give much away, so take advantage when he does. In the 2015/16 tax year, for example, you may shelter up to £15,240 free of income and capital gains tax in an ISA.

Watch costs

"Cheap" is not the same as "good value", and expensive investments are not necessarily bad ones. Do factor costs into your decision making, though, as they can be a serious drag on returns.

Keep it simple

If you do not understand a particular kind of investment, do not get involved.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.