1. Rebalance your portfolio
“Many investors forget to regularly stand back and review their investment strategy and instead make ad hoc choices for a new Isa or pension contribution at the end of the tax year, often based on whatever seems flavour of the moment and without reference to their existing holdings. Japanese equities may be attractive, but there is no point investing more if you already have half your portfolio there.
“Even originally well planned portfolios will need to be periodically reviewed and rebalanced, as allocations to different asset classes and markets naturally drift over time. That can mean the risk-profile of a portfolio can change materially, potentially no longer matching your needs or goals.”
Jason Hollands, managing director, business development & communications, Bestinvest
2. Get rid of small holdings in shares and funds
“Many people build up an unwieldy collection of shares and investment funds which can include some that make up a very small part of an investment portfolio. This makes it more difficult to administer a portfolio and have a real understanding of how it’s performing. Sell or amalgamate small holdings and focus on those investments which are best placed to achieve your financial objectives.”
Patrick Connolly, certified financial planner, Chase de Vere
3. Check for fund manager moves
“One of the standout observations of 2013 has been the number of high profile fund managers who either left the industry, defected firms or who have announced plans to retire or move on. These include the biggest beasts of all, Anthony Bolton and Neil Woodford, as well as the likes of Richard Buxton, Sanjeev Shah, Tony Nutt, Phillip Gibbs and Graham French and numerous lesser known names.
“We've long pointed out the high turnover of managers on actively managed retail funds. In fact our research suggests that the average tenure on a fund is 5.8 years - but even that number is favourably skewed by a handful of longstanding veterans. When a manager changes on a fund you own, it is important to assess the case for continuing to hold the investment or moving elsewhere.”
Jason Hollands, managing director, business development & communications, Bestinvest
4. Learn from your mistakes
“Rarely will you hear an investor talk about their mistakes, only their successes. Admitting mistakes is very difficult, investors often forget their mistakes as they don’t want to draw attention to them; however, I have learnt that it pays in the long run to look at where I went wrong and why, so I can avoid the same mistake in the future. I also like fund managers who are able to critically review their own investment decisions – good and bad – and learn from them.”
Adrian Lowcock, senior investment manager, Hargreaves Lansdown
5. Make a budget
“I suspect that the majority of people don’t budget, or have let their budget fall out of date as spending has become more relaxed, perhaps particularly around this time of year. If we don’t know how much we are spending, how can we know that we are not spending more than is coming in, and/or how do we know what we have to save? A budget isn’t necessarily there to stop you spending, it is there to help you to decide what to spend your money on.”
Richard Wadsworth, financial planner, Carbon Financial Partners
“Record everything you spend your money on, including the morning coffee, lunchtime sandwich etc for three months and then look back at where all of your non essential spending is going. Then consider if this could be put to better use towards your planning objectives, but bear in mind the value of buying something is not just the financial cost, also consider how it makes you feel as this is equally important. There has to be an element of enjoy life now, not just focusing on the future.”
Richard Gough, chartered financial planner, Castle Court Wealth Management
“Pay yourself first, not last. By this I mean make all your savings and investments at the start of the month when you get paid, not at the end of the month. If you wait until the end of the month ‘to see how much you can afford’ you will tend to find that you have spent any spare funds on ‘stuff’ rather than your financial planning.”
Richard Gough, chartered financial planner, Castle Court Wealth Management
6. Stay on top of tax issues
“Make sure you keep as much of your money as possible by minimising tax and costs. For most people, securing a tax advantage is easier than securing a higher investment return by trying to find a ‘hot’ investment. Consider pensions and Isa structures first.”
Richard Wadsworth, financial planner, Carbon Financial Partners
“The pensions lifetime allowance reduces from £1.5 million to £1.25 million from 6 April 2014. Check before making any more pension contributions that your pension plans, to include current and old employer schemes, will not exceed £1.25 million by age 55. The price of doing so is a 55 per cent tax charge. The power of compound interest should not be underestimated when assessing how close to this limit you might get.”
Ruth Sturkey, chartered and certified financial planner, The Red House
7. Scrutinise your pension investments
“Take a keen interest in how your pension fund is invested. Your pension is dependant on what you put in and how well the pension investments perform. So look at your investment choices and make an informed decision. As a rough guide, make sure you are saving at least 5 per cent of income in your 20s, 10 per cent in your 30s and 20 per cent in your 40s.”
Anna Sofat, financial planner, Addidi Wealth
8. Give yourself an investment pep talk
“I remind myself as an investor that what is fashionable is not always best, that cost is important but not as much as returns and that we forget the lessons of last year as quickly as we learn new ones.” Paul Taylor, chartered financial planner, McCarthy Taylor
“Investors, and people, tend to have a herd mentality, so when markets fall investors sell out only to buy back in once the market has risen. It is difficult to break away and not follow the herd, as human nature makes us want to sell in times of stress or high risk, but the reverse is usually more rewarding as you will be buying low not selling low.”
Adrian Lowcock, senior investment manager, Hargreaves Lansdown
9. Make it personal
“In light of recent economic history, it’s understandable that we’ve become focused on the short term performance of our financial portfolio. But we’re at risk of forgetting that when it comes down to it, our personal finances are purely the means to achieve our true wants and needs. This is not actually about chasing abstract numbers and percentages.
“So, for 2014 and beyond, I’d start every financial decision with the question: ‘What do I want this to do for me?’ and then work backwards from there, instead of chasing the best possible savings rate, or fund performance.
“This means evaluating what you need the capital to achieve for you, how and when (for example, to secure a university education for your children in 10 years’ time, buy the perfect second home, travel the world when I am 60, or simply not to have to worry about money anymore when I am retired).
“With this as your financial new year’s resolution, I can’t help thinking those arbitrary figures will become a lot more meaningful, not to mention highly motivating.”
Patrick Murphy, chartered financial planner, Zen Wealth
10. Get paperwork and time management under control
“I feel much happier and more relaxed when I file away financial paperwork as it arrives, taking action when needed. This is the reasonably simple case of having ring binders set up with sections for each policy and account, and then scheduling the ten minutes or so each week to file things away.”
Martin Bamford, chartered financial planner, Informed Choice
“It’s very easy to put off making financial decisions as generally there is something simpler or more instantly rewarding to do with our spare time. However, many aspects of personal finance can be put on ‘auto-pilot’. Saving monthly into an Isa is an obvious example.
“That way, your only decisions are whether to increase your direct debit each April, and every now and again, to check your fund choice. This leaves more time and mental energy for areas where a bit of focused time and effort could make a much bigger difference to your financial well-being.”
Jason Witcombe, chartered financial planner, Evolve Financial Plannning
