Portfolio reviews: what to actually check, and how often

Most investors either never review a portfolio or review it constantly, and both produce poor outcomes. A structured annual review, with a defined set of questions, sits between the two and is where most of the available improvement lives.

First: has the goal changed?

Start with the purpose rather than the performance. Has the target amount changed with inflation or with circumstances? Has the date moved? Has a new goal appeared, or an old one been met or abandoned?

A portfolio built for a goal that no longer exists is a common and invisible problem, and it is only ever found by starting the review at this end.

Second: has the allocation drifted?

After a strong equity run, a portfolio set at 60 per cent equity may now be at 75 per cent, which means the risk being carried is higher than the one that was chosen. Rebalancing back to the intended allocation is mechanical, unexciting, and imposes the discipline of trimming what has done well.

Rebalance annually, or when the allocation drifts beyond a defined band - five percentage points is a common trigger. Consider the tax consequences of the switches before executing, and where possible rebalance using new contributions rather than by selling.

Rebalancing feels wrong every time you do it. That is roughly the point.

Third: overlap and clutter

Portfolios accumulate. A fund bought on a recommendation in 2019, another added during a bull run, a third from a relative in the business - and the result is fifteen funds holding substantially the same fifty companies.

Check the holdings overlap between funds in the same category. Where two funds are more than substantially similar, one of them is adding cost and complexity without adding diversification. Consolidating is usually the single highest-value action in a review.

Fourth: performance, in context

Compare a fund against its own benchmark and its category peers over three and five years, not against a fund in a different category and not over one year. Short-run underperformance in a fund with a consistent process is normal; sustained underperformance against the benchmark across a full cycle is a reason to look harder.

Look at what changed rather than only at the number. A fund manager departure, a change in mandate, a large increase in fund size that constrains a small-cap strategy - these are more informative than a trailing return.

What not to do

Do not chase last year's best performer, which is the most reliably value-destroying behaviour available to a retail investor. Do not stop SIPs during a decline, which converts averaging into loss-taking. Do not review monthly, which mistakes noise for information.

And check the administrative details while you are there: nominations on every folio, current contact details with the registrar, and consolidated statements reconciled against your own records. These take twenty minutes and spare a family considerable difficulty later.