Investment Review and Rebalancing for the New Financial Year

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In the final part of our financial year-end series, we explore why it’s important to review and rebalance your investment portfolios. This process ensures that your investments continue to align with your risk tolerance and financial objectives.

Risk tolerance refers to your ability to endure market volatility and uncertainty. It’s about how much market fluctuation you can comfortably withstand without altering your investment strategy. In other words, it’s how much of the market’s ups and downs you can handle without losing sleep.

Understanding Your Current Portfolio

Begin by taking a comprehensive look at your current investments. Evaluate the performance of each asset class, such as shares, bonds, property, and cash. Consider the following questions:

  • How have my investments performed over the past year?
  • Are there any significant changes in the market that affect my portfolio?
  • Is my asset allocation still in line with my risk appetite?

The Art of Rebalancing

Rebalancing involves adjusting the weightings of different asset classes in your portfolio. If one asset class has outperformed others, it may now occupy a larger percentage of your portfolio than you initially intended, potentially exposing you to higher risk. To rebalance, you might:

  • Sell off portions of over-performing assets.
  • Purchase more of under-performing assets to maintain your desired asset allocation.

Tax Considerations

When rebalancing, be mindful of potential capital gains tax (CGT) implications. Realising gains can lead to a tax liability, so it’s essential to plan your rebalancing strategy effectively. You may want to consider:

  • Using capital losses to offset gains.
  • Timing the sale of assets to coincide with a lower income year.

Seeking Professional Advice

While this article provides an overview, it barely scratches the surface of the complexities involved in investment review. For a thorough analysis and personalised advice, it’s advisable to consult with a financial adviser. We encourage you to schedule a consultation with us to discuss your specific needs and tailor a strategy that aligns with your financial goals.

Conclusion

Regularly reviewing and rebalancing your investment portfolio is a key component of sound financial management. By taking the time to assess your investments and make necessary adjustments, you can enter the new financial year with confidence, knowing your portfolio is well-positioned to meet your long-term goals.

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