It's a great time to review your ISA investments

Servicing the car, shopping around for the best insurance deal, regularly investing and reviewing your ISA portfolio... most of us accept that these are good habits to get into - but how many of us actually stick to them?

In a recent survey conducted on behalf of National Savings & Investments, 16% of those who were aware of ISAs said the reason they haven’t invested is because they find it confusing; while one in ten people admit that saving money in an ISA this year has never occurred to them (source: National Savings & Investments, Winter 2010 savings survey).

ISA investing doesn’t need to be confusing. With the help of a financial advisor, gaining a clear understanding of how this valuable allowance can form a cornerstone of your investment portfolio is possible for even the most inexperienced investor.

The key to building a cohesive and coherent ISA portfolio, with the potential to achieve your long-term financial objectives, is diversification.

Diversification means spreading your investments across a range of different assets to reduce the impact of any one falling in value. Not even the most talented investor can predict which one is going to produce the best return year after year, but there are two things you can be sure of: 1) The best-performing investment in one year can often turn out to be the worst-performing investment the next year. And 2) by spreading your money across a selection of asset classes, geographic regions and sectors, your investments stand a better chance of achieving more consistent returns.

With personal finance grabbing more and more column inches in the press, many investors have accumulated a hotchpotch portfolio of investment ideas over the years as each ISA season heralds the discovery of the next “must-have” asset class or fund.

And it’s easy to see why. The choice is potentially bewildering. There are around 2,500 retail funds in the UK into which investors can invest their stocks & shares ISA allowance. Faced with the challenge of finding the right one, it’s easy to see why some base their decision on whatever is the latest investment fashion, the most impressive advert or the best claim to superior past performance.

Yet it is a decision that’s important to get right.

Each investor’s objective will be unique to their own individual needs and goals. Whether you are looking to provide additional income in retirement, building a capital sum for the future or a combination of both, ensuring that your investments are working together is vital for your future financial wellbeing. And regularly reviewing your portfolio is an important discipline to help achieve this goal and a habit that we should all stick to.

Selecting your ISA investment manager is one consideration but regularly reviewing their performance is an equally important factor.

Not properly monitoring the performance of your investment manager is akin to driving a car without any rear-view mirrors – you don’t get any warning of what’s coming. In the investment world, that might be the departure of a ‘star’ investment manager you’d specifically chosen or the impact of macroeconomic factors on specific regions or asset classes.

But how frequently should you review your ISA portfolio? There is no right or wrong answer to this question but the commonly accepted view is that an annual inspection is adequate for most. Identifying the strong performers (and those that haven’t fared so well) is one aspect of the exercise but, fundamentally, investors should be asking one key question: is this portfolio still working to achieve my financial objectives? Conducting a regular review will ensure that your investments are working towards your objectives.

Whether your portfolio needs a small tweak in one or two areas or a complete overhaul, by working together with your advisor, the process for getting your portfolio back on the right course can be a simple and cost-effective one.

To receive a complimentary guide covering Wealth Management, Retirement Planning or Inheritance Tax Planning, produced by St. James’s Place Wealth Management, contact Ian Cockbain, Senior Partner of St. James’s Place Wealth Management  on 0151 224 8710, by email  or visit