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Review your investments

This column is by Bill Blevins of Blevins Franks financial advice group (www.blevinsfranks.com) who has written for the Sunday Times on overseas finance for 10 years.

He is co-author of the Blevins Franks Guide to Living in France.

When was the last time you reviewed your investments and the tax planning vital to ensure the optimum returns? I mean, sat down and looked at all your assets, whether shares, funds, “tax-wrappers” or other “schemes”, property, cash holdings etc, at the same time considering your current circumstances, objectives and time horizon, not to mention today’s investment climate?

If investments are not actively managed there is a good chance the exposure to investment risk is wrong for you and the overall portfolio is not targeted to your specific needs.

How and when was your portfolio put together? If you were starting with a clean sheet today, would you invest in the same assets and in the same form?

Many people have ended up with their current portfolio by accrual over many years. In my experience, most investment decisions traced back to the point in time they were made are individually very good. However, when you look at the accumulation of all those good ideas they often do not add up to the best options now available – and what you would do today if you were starting now!

Does this ring true? Successful investment management is about managing risk versus return. Diversification and the right balance between assets are fundamental to long-term success. If you do not “tailor make” your portfolio to your precise needs and re-model your investment and tax planning approach you could be losing out big time.

Your portfolio could have inappropriate diversification due to past performance and be out of synch with your present and future needs. It may be riskier than you realise – and riskier than it need be for your objectives.

Alternatively, if most of the savings you are relying on in retirement are held in bank accounts, your real returns may be insufficient to keep pace with inflation, after tax – so you lose spending power each year.

Your portfolio may also not be targeted to your needs. For example, many retired people take income from their investments, but if your portfolio does not generate a natural income you could have to withdraw capital.

This leaves less capital working to provide income and growth in future or to tap into if needed. You may have to sell at a loss if you need income when asset values have fallen.

When buying investments and building a portfolio, you should ideally establish the basics before you purchase anything or move capital around. These are your investment objectives, circumstances, investment time horizons, attitude to risk etc. Any assets you already own, such as property and pensions, need to be considered in terms of their place and risk impact on the overall portfolio.

Whether you have capital to invest, or own shares and funds without an overall plan, you should seriously consider what you can miss out on unless you work with an experienced and regulated wealth manager, discuss the basics mentioned above to give a clear picture of your situation and then work together to construct your portfolio.

You may end up keeping some existing investments, but this should be a conscious decision to meet your personal requirements.

If you already have a considered investment strategy, or once you set one up, it is important to have periodic reviews. If your strategy was established with the help of a wealth manager he should assist you – or you might consider a new adviser for a second point of view. Do this at least once a year, unless circumstances significantly change in the meantime.

During the review consider the following: Have your circumstances changed? Or your objectives? Your time horizon? Has your attitude to risk changed? Have you got more capital available for investment?

If anything has changed your portfolio may need to be amended to reflect this change.

Just as important as your personal situation is the need to re-balance asset diversification.

As some assets rise in value, in varying degrees, and others fall, the asset allocation is unlikely to reflect your original plan. Your portfolio could now be much riskier, even without any direct changes to your holdings. In this case it might be appropriate to sell some assets and buy others to re-establish your original weightings. Your wealth manager should advise on this.

Regular re-balancing helps to control risk and usually has a positive performance effect.

Last but certainly not least, if you have bought investments here and there without an overall tax planning strategy in place, they are probably not tax efficient. With today’s high taxes you do not want to lose any more to tax than you absolutely have to.

When planning your portfolio with your wealth manager, confirm he is setting it up to be as tax efficient as possible in France, to benefit both yourself and your heirs if you plan to pass on your investments.

An experienced wealth manager aware of your personal aspirations will help you establish a plan to achieve your objectives and improve your financial security.

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