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Talk to a planner about... Reviewing Your Portfolio

It is very important that investors regularly review their investment portfolios. It is rather like having a regular health check, to ensure that your investments are in healthy shape and can continue to meet your needs for income and capital growth.

This does not mean that the investments need to be turned over or changed on a regular basis. If they are good quality blue chip investments then they can be held for the long term. However there are some pitfalls which investors often fall into.

1. Becoming overweight in one investment

Some clients become emotionally attached to particular investments. In particular this may be the case if the investments have performed very well. In some cases a particular investment may grow to become the substantial part of a portfolio, This will then create a far greater level of risk for the portfolio should the investment subsequently under perform or fail.

From time to time we hear from investors who have lost "small fortunes" following the decline in the share price of a particular company. This is particularly disturbing when the shares have been issued "free" as in the case of AMP, Incitec Pivot and AWB.

Our advice to investors is to regularly review their portfolios. This means taking profits on investments which have had solid growth so that they do not become overweight in the portfolio and expose the portfolio to a high level of risk. The expressions "take some off the top" or alternatively "leave something there for the next guy" are both good mottos for the astute investor.

2. Clearing out the minnows

Over the past few years we have seen a number of new listings on the sharemarket. These have come about through share splits or spin outs from major companies such as BHP, Amcor, Boral and a number of small mining companies. Investors have often been left with small holdings in companies in which they sometimes have little interest.

In many cases, it is appropriate to review these small holdings. The decision should be made whether to retain the holdings, increase them, or sell them. Each investment should be looked at on its merits.

It may be that in an older portfolio a large proportion of the share holdings are only worth a small fraction of the total value. In this case a number of shares could be sold with very little change to the overall portfolio. This is a simple case of rebalancing the portfolio and offloading some of the small insignificant holdings.

3. Introducing emerging industries

Many older portfolios tend to be overweight in certain sectors such as banks and resources. This is largely because the banking and resource sectors have performed so strongly over the last 10 years.

On the other hand these portfolios may have little representation in such sectors as healthcare, small retailers, transport and infrastructure. While the banking sector may offer security and attractive income yields, some of these emerging sectors could offer excellent prospects for capital growth in the future.

It is important that investors review their portfolios and consider the introduction of some of the newer companies from these emerging industries.

We encourage investors to take the time to review their portfolios on an annual basis. Our experienced advisers can provide help and suggestions in this regard. An experienced adviser can bring a fresh approach and ideas and while working through a structured process of portfolio analysis.

If you would like to review your investment portfolio please contact us on 08 8333 2488 or via email.