Review your needs and goals - Evolution Financial Planning

Take the time to think about what you really want from your investments

You need to consider what you really want from your investments. Knowing yourself, your needs and financial and lifestyle goals, and your appetite for risk is a good start.

Consider your reasons for investing
It’s important to know why you’re investing. The first step is to consider your financial situation and your reasons for investing.

For example, you might be:
Looking for a way to achieve higher returns than on your cash savings
Putting money aside to help pay for a specific goal such as your children’s or grandchildren’s education or their future wedding
Planning for your retirement

Determining your reasons for investing now will help you work out your investment objectives and influence how your investments are managed in future.

Decide on how long to invest
If you’re investing with a specific financial and lifestyle goal in mind, you’ve probably got a date in mind too. If you’ve got a few goals, some may be further away in time than others, so you’ll need to have different strategies for your different investments. Investments rise and fall in value, so it’s sensible to use cash savings for your short-term goals and invest for your longer-term goals.

Short term
Most investments need at least a five-year commitment, but there are other options if you don’t want to invest for this long, such as cash savings.

Medium term
Committing your money for at least five years opens up a selection of investments that might suit you. Your investments make up your ‘portfolio’ and, if appropriate, should contain a mix of funds investing in shares, bonds and other assets, or a mixture of these, which are carefully selected and monitored for performance.

Long term
Let’s say you start investing for your retirement when you’re fairly young. You might have 25 or 35 years before you need to start drawing money from your investments. With time on your side, you might consider riskier funds that can offer the chance of bigger returns in exchange for an increased risk of losing your money.

As you approach retirement, you might sell off some of these riskier investments and move to safer options with the aim of protecting your investments and their returns.

How much time you have will have a big impact on creating your investment portfolio. As a general rule, the longer you hold investments, the better the chance they’ll outperform cash – but there can never be a guarantee of this.

Establish an investment plan
Once you’re happy and have set your financial and lifestyle goals, the next step is to get your investment portfolio in place. We’ll help you identify the right type of investment options suitable for you.

Build a diversified portfolio
Holding a balanced, diversified portfolio with a mix of investments will help protect it from the ups and downs of the markets. Different types of investments perform well under different economic conditions. By diversifying your portfolio, you can aim to make these differences in performance work for you.

Diversifying your portfolio in a few different ways through funds that invest across:
Different types of investments
Different countries and markets
Different types of industries and companies

A diversified portfolio is likely to include a wide mix of investment types, markets and industries. How much you invest in each is called your ‘asset allocation’.

Make the most of tax allowances
As well as deciding what to invest in, think about how you’ll hold your investments. Some types of tax-efficient account mean you can normally keep more of the returns you make. It’s always worth thinking about whether you’re making the most of your tax allowances too.
You also need to bear in mind that these tax rules can change at any time, and the value of any particular tax treatment to you will depend on your individual circumstances.

Review your portfolio periodically
Periodically checking to see if your portfolio aligns with your goals is an important aspect of investing.

These are some aspects of your portfolio you may want to check up on annually:

Changes to your financial goals
Has something happened in your life that calls for a fundamental change to your financial plan? Maybe a change in circumstances has changed your time horizon or the amount of risk you’re willing to handle. If so, it’s important to take a hard look at your portfolio to determine whether it aligns with your revised financial goals.

Asset allocation
An important part of investment planning is setting an asset allocation that you feel comfortable with. Although your portfolio may have been in line with your desired asset allocation at the beginning of the year, depending on the performance of your portfolio, your asset allocation may have changed over the period in question. If your actual allocations are outside of your targets, then perhaps it’s time to readjust your portfolio to get it back in line with your original targets.

Diversification
Along with a portfolio with a proper asset class balance, you will want to ensure that you’re properly diversified inside each asset class.

Performance
Consider if there are certain aspects of your portfolio that need re-balancing. You may also want to consider selling to help offset capital gains you might take throughout the year.

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