Reviewing your portfolio properly

Portfolios need periodic maintenance and do not need supervision, and confusing the two is where a great deal of damage originates.

Why annual is enough

The evidence.

Research on myopic loss aversion finds that more frequent evaluation increases perceived risk and reduces risk-taking, which produces lower long-run returns.

Research on trading frequency finds that more activity correlates with worse net outcomes.

And nothing in a long-horizon portfolio requires monthly attention.

Which means an annual review, diarised, is not a compromise — it is the appropriate frequency.

What to check

The checklist.

Allocation drift: has the split between asset classes moved beyond the rebalancing threshold?

Costs: what are you paying in total, and has a cheaper equivalent become available?

Platform: is the charging structure still appropriate for the portfolio size, which changes as it grows?

Contributions: are they still appropriate, and should they increase with income?

Circumstances: have horizon, income, dependants or capacity for loss changed?

Objectives: is the plan still on track against the target?

Tax: have allowances been used, and are they about to expire?

Nominations: are beneficiary nominations on pensions and policies current?

And the policy document: does it still reflect what you are doing?

What not to check

Deliberately excluded.

Whether each fund beat its peers last year, which invites performance chasing.

Whether a different allocation would have done better, which is hindsight.

What commentators expect for the year ahead.

And the daily or monthly value, which produces no useful information and produces emotional reactions.

Measuring performance honestly

Which most people do not.

Calculate a money-weighted return that accounts for the timing of contributions, rather than looking at the balance and comparing with the previous year.

Compare against a relevant benchmark: what a simple global index fund at your allocation would have produced with the same contributions.

Which is the honest comparison and which frequently reveals that activity has not helped.

Most platforms provide some form of personal rate of return, and the methodology is worth understanding.

Rebalancing at the review

The main action.

Compare current allocation against target.

If drift exceeds the threshold, rebalance — with new contributions first, then by selling within tax-advantaged accounts, and only then in taxable accounts where the tax consequence should be considered.

If drift is within the threshold, do nothing, which is the most common correct answer.

The cost review

Where money is found.

Total the ongoing charges of every fund weighted by holding.

Add platform charges.

Add any adviser fee.

Express the total as a percentage and as an amount.

Compare each fund against a broad equivalent.

And check whether a cheaper share class of the same fund exists, which is common and which platforms do not always move you to automatically.

Consolidation

Which is worth considering periodically.

Multiple accounts across platforms produce duplicated charges, fragmented reporting and a picture nobody has in full.

Consolidating simplifies and frequently reduces cost.

With the standard cautions: check exit charges, check that valuable guarantees on older pension products are not lost, and check that the receiving platform offers what you hold.

The written record

What to produce.

A dated note of: the total value, the allocation, the costs, what was changed and why, and any change in circumstances.

Which builds a record over years that is considerably more informative than memory.

And which makes the following year's review faster.

When to review outside the schedule

Legitimate triggers.

A change in employment, income or household.

An inheritance or windfall.

A change in health affecting horizon or capacity.

Approaching a goal within the de-risking window.

A fund changing its mandate or closing.

And a material change in costs.

Market movements are not on this list, which is the point.

The temptation to do more

Worth naming.

An annual review that finds nothing requiring action feels unsatisfying, which produces the urge to change something.

Which is action bias, and which is where reviews turn into portfolio churn.

A review concluding that no action is needed is a successful review, and recording that conclusion explicitly makes it easier to accept.

General information only, not investment advice. Investments can fall in value and past performance does not indicate future returns. Consult a regulated financial adviser.