Why now is a good time to take a break and review your investment portfolio

Reviewing your investment portfolio can be a bit of a chore, but you should do it at least once a year. And now is the ideal time to be doing it, says John Stepek. Here’s why.

Man reading a financial newspaper
Take a break from the news for a little while
(Image credit: © Getty Images/iStockphoto)

Reviewing your portfolio can feel like a chore, depending on your fondness for admin. But it’s something we should all do at least once a year.

The question is: when? I don’t know about you, but at Christmas I want to relax. And at the turn of the tax year, I tend to be busy with other stuff.

There’s another option that I think is ideal – and that’s during panic season. Which happens to be right now.

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August is a weird month

If you’re an active investor, it’s likely that you try to stay on top of the news. But sometimes it’s a good idea to take a break. And the summer months are the ideal time.

This is partly because August tends to be a quiet news month. That sounds daft to non-journalists – the world does not grind to a halt in August, as the headlines are making depressingly clear this morning. But a lot of the “routine” stuff does come to a halt. Politicians go on holiday, corporate earnings season is winding down until the next quarter – the normal timetables go out of the window.

As a result, big events (like the fall of Kabul) get even more feverish coverage than usual, while small ones (like an alpaca being put down) end up hitting the front pages. So the ratio of noise to signal (or bullsh*t-plus-empty-opinion to facts, for those who prefer blunter language) is even higher than normal.

All of this is made worse when markets are as frenzied and as expensive as they are now. In bear markets – once the worst of the collapse has happened, anyway – there’s a sense of apathy and lethargy. Why bother buying, when the market will only go down anyway?

Funnily enough, it’s the same sort of psychology that economists always ascribe to consumers when it comes to inflation. I find the argument that falling prices put people off buying consumer goods unconvincing – a telly wouldn’t have been sold since about 1979 if that was the case.

But it seems to work when it comes to stores of wealth. When markets are going down, no one is in a rush to buy. But when markets are shooting up, there’s a sense of pressure – buy now while stocks last!

It all combines into a sense that you need to act; that you need to do something. Here’s what to do about that.

Why you need to focus on the boring bits

The main thing to do if you feel a generalised desire to “act” is to calm down, take a deep breath, and don’t do anything. Panic is never really a helpful emotion but it’s a near-certain money-loser in markets.

If you still feel an urge to act, here’s the first thing to consider, and it’s a real passion killer: do you have a plan in place already? Do you know what your financial goals are, particularly your long-term financial goals?

If you don’t, then you certainly don’t need to be jumping in and out of markets. What you need to do is to sit down and get your finances in order. What are you saving for? (Chances are, it’s your retirement). What does your asset allocation look like? (If you don’t know what asset allocation is, you need to find out rather than fretting about whether bitcoin is going to go up or down based on the fall of Kabul. You can learn more about asset allocation here.)

Even if you do know what your long-term plan is, and what your ideal asset allocation looks like, there are almost certainly a few other bits of maintenance your portfolio could do with.

I hate to say it – particularly as I spend a lot of my time writing about the “exciting” bits – but for most of us, the way to improve our returns is to spend less time prognosticating and a lot more time attending to the boring admin side of investment.

Your cost of investing is a good example. As costs have risen up the investment agenda, competition has helped to drive costs down across the board. And it’s fair to say that you can grow too focused on the costs – a couple of basis points between one tracker fund and another is not worth feeling angsty about.

However, I suspect that most of you reading this aren’t in the position where you’re obsessively comparing the costs of every new FTSE All-Share tracker that comes out. The problem you are more likely to have is that you haven’t looked at it for a while and you’re paying significantly more than you need to.

So if you’re getting ants in your pants, the thing to do is switch off your newsfeed and your charting packages and instead sit down and look at the broker you’re using, the funds you own, and whether your asset allocation needs to be rebalanced.

The cure for over-excitement is to focus on the boring bits. It’ll pay you more in the long run. And that’s what matters.

Finally, I’d suggest consuming your news in manageable chunks. Once a week in the form of MoneyWeek magazine is one option I’d humbly suggest. If you’re not already a subscriber, get your first six issues free here.

John Stepek

John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.