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An adviser's view on how to build a successful portfolio

Financial adviser, Gary Morgan offers his guidance and tips to help build a successful portfolio.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

It’s important to make sure your portfolio is structured in the right way to reach your goals. So it’s no surprise one of the most frequent questions I’m asked is my opinion on a client’s portfolio.

We’re firm believers that if you’re armed with the right tools and information you can self-manage your own portfolio.

Below, financial adviser Gary Morgan shares his top tips to help you build an effective portfolio.

This article isn't personal advice. If you're not sure whether an investment is right for you please seek advice. All investments fall as well as rise in value, so you could get back less than you invest.

Set clear investment goals

There aren’t many of us who just invest to make it to a certain number.

You should always keep in mind why you want to get to that number. It could be income for retirement, building a lump sum to help fund your children’s education or saving for things like weddings or a house purchase.

Once you’ve identified your goal, this should be the focus of your approach. You should devise a strategy to help achieve that goal and regularly assess your investments against it to make sure you’re on track.

Consider when you’ll need the money

When are you aiming to retire or help your children buy their first house?

Once you know your aim, you need to think about when that aim needs to be reached. The length of time you’re aiming to invest for is called your investment horizon.

You also need to consider if you have the right level of risk in your portfolio to reach your goal in your required time frame, this will depend on your circumstances and your own attitude to risk.

Find out more about risk

Risk can be a difficult idea to get your head around – it can be tricky to balance taking enough risk to reach a goal in a given time while keeping a portfolio which is hopefully resilient to market falls.

So if you need a helping hand, we can help. It’s our job as advisers to help understand our client’s appetite for risk and how much a client can afford to lose if the market dips. It’s a conversation which can feel uneasy but it’s an important part of the picture. From this we can then create a suitable portfolio.

Tip: There’s normally more than one thing investors want to save and invest for. Try drawing out a rough timeline of what you might need your money for and when. It should help keep you on track to meet your goals and highlight which resources you can call upon when each time comes.

Have a good mix of investments

Diversification, spreading your money across different investments, seems simple in principle but it’s more difficult in practice. Understanding different investment types like funds, shares, bonds and cash, and how they perform differently is important here.

With a diversified portfolio of investments, returns from better performing investments can help offset those that under perform. Diversification doesn’t however guarantee positive returns, or shelter fully against losses in market falls. But, it can reduce the risk of experiencing a larger loss as the result of being over-exposed to a single investment.

It can be easy to think your portfolio is diverse but when you look into the details, you may find the funds you hold have quite a lot of cross over. Some clients also diversify in one way but not another. A common example is being diversified by sector or geography but not by asset type.

Learn more about diversification

Tip: Have a look at the asset classes in your portfolio to check if you’re truly diversified and do some research to see if there’s any cross over between funds.

Negative correlation is key

When two asset classes have negative correlation, they will tend to move in different directions. If they have high correlation, they will tend to rise and fall together.

Assets with low or negative correlation are good diversifiers and help to reduce portfolio risk as it can mean you always have something working well.

Take shares and bonds. Historically, shares have delivered the best long-term returns. But share prices usually swing up and down more than bonds, and shares are usually more sensitive if the economy starts to slow down. Bonds have tended to hold better in market jitters, providing a more stable return when shares are slipping. Past performance isn’t a guide to the future however.

Tip: Look for assets that are likely to be affected differently by economic conditions and have low correlation with the rest of the portfolio. Try not to target investments which are strongly correlated with what a portfolio already has.

How can we help?

Now more than ever, it’s important your next steps take you in the right direction. But we understand crafting a successful portfolio can be a tricky art to master. If you need a helping hand though, we have advisers on hand to help build your portfolio to suit your financial objectives.

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2. Meet your adviser

They'll find out more about your goals and get to know your current situation. From here they can create a plan to secure your future.

Your adviser will also explain more about advice and any charges required to help you get the best out of our service.


3. Secure your future

As long as you’re happy with our charges, we’ll give you your plan to review.

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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