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Does your portfolio need a spring clean?

 
Rob Morgan
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Daffodils in a field
Spring is a perfect time to take a fresh look at your investments. Rob Morgan looks at five ways to check they are working as hard as possible for you. (Source: Shutterstock)

1. Be an ISA early bird

While many people leave their ISA contributions until the end of the tax year, it is often better to use the allowance early. That way your chosen investments are sheltered from tax immediately and have longer to produce income and growth – though it is also possible it could work against you should they fall in value over the course of the tax year.

For the 2018/19 tax year the ISA allowance is £20,000, to be allocated as you wish between a Cash ISA and a Stocks and Shares ISA (plus other options, a Lifetime ISA – if you are eligible – and an Innovative Finance ISA). Charles Stanley Direct only offers a Stocks and Shares ISA for investments.

Don’t worry if you don’t have this large lump sum to invest right away. With Charles Stanley Direct you can contribute smaller amounts to our Stocks and Shares ISA as and when you like, or set up regular savings from your bank account.

2. Plan pension contributions

Whether you are new to investing or nearing retirement, pensions are likely to be an important consideration. When you make a contribution to your pension, the government adds money. This is called tax relief and is one of the main advantages of using a pension to save for retirement.

In the 2018/19 tax year, an investor can receive up to 45 per cent tax relief when they make a contribution to a personal pension such as a SIPP (Self Invested Personal Pension), with 20 per cent paid by the HMRC into the pension and any higher and additional rate income tax reclaimable.

For example, an investor contributes £8,000 into their SIPP and £2,000 is claimed back from HMRC by the pension provider. A higher rate tax payer could claim back up to a further 20 per cent via their tax return, reducing the overall cost of the contribution to as little as £6,000. In the same instance, additional rate tax payers could claim back up to a further 25 per cent making the cost just £5,500 for a £10,000 contribution. There’s more on how much you can contribute to pensions here.

No-one can be sure of pension rules in the future. Tax relief may become less generous, especially for higher earners. For instance, a flat rate incentive of between 25 per cent and 33 per cent for all pension contributions has been suggested. It may make sense for some people to secure pension tax relief in its current form while it lasts.

3. Ensure your portfolio is still appropriate for your needs

Your circumstances and aims will change over time, and it is well worth making sure your portfolio reflects this. Approaching retirement is a good example. This could be a time when to consider reducing risk in your portfolio, particularly if those assets are going to be relied upon to generate an income. This generally means gradually upping the weightings of less risky areas such as cash and good-quality bonds and reducing equity exposure.

4. Consolidate your accounts

With Charles Stanley Direct you can transfer in ISAs and personal pension accounts held elsewhere so that more of your investments are held in one place. With your investments under one roof it’ll be easier to buy and sell investments and see how they are performing. Remember too, the more assets you hold with us, the cheaper it can become, and we also offer discounts for frequent traders.

5. Retain your balance

Over time your portfolio can become out of kilter as various assets rise or fall at different rates. If certain investments perform particularly well they will grow to represent a larger proportion of your portfolio and could mean additional risk. It can be prudent to bank profits in these and use the proceeds to top up components that have underperformed – thereby retaining the intended balance of your portfolio.

This website is not personal advice based on your circumstances. No news or research item is a personal recommendation to deal. Investors should be aware that past performance is not a reliable indicator of future results and that the price of shares and other investments, and the income derived from them, may fall as well as rise and the amount realised may be less than the original sum invested. Investment decisions in collectives should only be made after reading the Key Investor Information Document or Key Information Document, Supplementary Information Document and/or Prospectus. If you are unsure of the suitability of your investment please seek professional advice.

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