Yahoo Finance It's time to give your portfolio an MOT: 5 tips to spring clean your ISA
With the ISA tax year deadline rapidly approaching, it’s time to get your investment portfolio in order.
The deadline for 2016/17 is April 5, so it may be a bit too late to start pushing money into a cash ISA or a stock one for this year – but the deadline does provide a great incentive to check whether you have been getting the best returns.
You’ll get a new allowance the next tax year of £20,000, up from the current £15,240, but won’t be able to contribute anything to the old ISA.
“It’s all too easy to skip the MOT and dive straight into topping up funds or making new investments,” said Mark Taylor, CEO of investment platform Selftrade from Equiniti.
“But giving your portfolio an annual health check to make sure it’s still doing what you want is a fundamental part of investing.”
He offers five tips to check you’re getting the best out of your Isas:
Analyse your underperforming funds
“Identify whether your portfolio holds any serial underperforming funds and consider cutting them loose,” says Taylor. “These are not funds that have had a rough few months, but ones that are consistent bad performers against their benchmark year-on-year, and more tellingly, against their peers. Sometimes in a drought, it’s best to seek water elsewhere.”
Check for overlaps
Most commonly, ISA portfolios are made of up of a whole host of funds and trusts, many of which may invest in the same stocks. Check whether you have any notable overlaps – you could be building an uncomfortably large position in a single stock simply from owning a handful of funds, which could be impacting your diversification.
Closet trackers
“If you’re paying active management fees, make sure you’re getting an active management performance,” says Taylor. “It’s important to check that your active funds aren’t just tracking the index, but are actually making intelligent decisions and earning their worth. If not, you may as well be invested in a similar ETF instead.”
Balance it out
“The recent rally in equities may have caused a shift in a number of portfolios, causing them to be too stock heavy,” he says. “The balance of weighting between what you have invested in bonds, and what you have invested in equities, may now be out of kilter. Think about rebalancing your portfolio to keep your risk level on track.”
Can you increase your contributions?
“If you’ve recently had a pay rise, or perhaps set up the payment as a novice investor, with a cautionary amount, you may be able to boost your savings and your earnings by increasing your contributions by a manageable amount.”
