Page 45 - DIY Investor Magazine | Issue 29

DID I CLEAN UP MY PORTFOLIO FROM UNNECESSARY ETFS?
• Is your portfolio needlessly complicated with asset classes you don’t need making portfolio re-balancing complicated? Understand how to clean up your portfolio
• Financial theory is clear on your chances of beating the market with stock selection, but if you really want to invest in single name stocks keep to a maximum of 5 to 10% of your portfolio (aka play money)
LUMP SUM OR DRIP FEED?
• Research says initial lump sum investment outperforms 2 out of 3 times when compared with drip fed investment – ‘pound cost averaging’ - with 2% incremental returns over a 12-month period
• However, when deploying savings in a volatile market it may be more comfortable to invest at regular intervals; the same research says if you decide to deploy cash over time be disciplined and invest on a monthly basis over 12 months (you can’t beat the lump sum investment over a longer time period).
DID I DECIDE HOW FREQUENTLY SHOULD I RE- BALANCE MY PORTFOLIO?
• The general guidance is that re-balancing frequency has low impact on overall portfolio returns as long as you do it
• Choose a rule - whether it’s deviation for your long term asset allocation or based on time period (e.g. annually) and stick to it
• Here is a detailed guide on how to rebalance
STAY TUNED
This investment checklist is work-in-progress and will be expanded as resources are added to guide you through the investment process; exciting things are in the pipeline – if you want to know more visit the site and subscribe to our newsletter.
Good luck with your Investments!
DID I VERIFY THERE IS NO OVERLAP IN MY ETFS?
• Do you have multiple ETFs covering the same markets and/or countries? Look at indices you want to track
• Overlaps may make sense if you are investing in the UK
and want world exposure (e.g. through MSCI ACWI) but also overweight your local country (e.g. add some FTSE exposure); be aware of home bias, though.
HAVE I PLACED THE ETFS INTO INVESTMENT ACCOUNTS BASED ON TAX EFFICIENCY?
• It is important to track your overall portfolio; separate and place your ETFs into different accounts based on tax advantages - e.g. place bond ETFs that pay dividends into a non-taxable account such as an ISA and accumulating equity ETFs into taxable accounts.
• The domiciliation of an ETF is important because of tax impact
AM I COMFORTABLE WITH MY BROKER’S SAFETY?
• Make sure you understand how likely a Broker is to fail and what are the available compensation schemes.
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45 DIY Investor Magazine | Jun 2021