How do I decide on my investment portfolio?

Portfolio management for sustainable income growth with risk diversification, financial concept

Ask the expert at Smith & Pinching about investment portfolio management - Credit: Getty Images/iStockphoto

I’ve just inherited £300,000 from my father. I have £100,000 left to pay off my mortgage so I will clear that, but I want to invest the rest of it so it grows over my lifetime to give my own children a legacy. I’ve done some reading about investments but don’t feel confident enough to decide where I should put it. What do you suggest?

Douglas Bridges is an Independent Financial Adviser with Smith & Pinching

Douglas Bridges is an Independent Financial Adviser with Smith & Pinching - Credit: Smith & Pinching

Douglas Bridges of Smith & Pinching responds:

There’s no quick and easy answer to this question, I’m afraid. Choosing an investment portfolio is a complex process and I strongly recommend that you get advice before committing your money to any specific investment assets.

Your investment strategy should be part of an overall financial plan that identifies your goals and puts you on course to achieve them. It should also recognise and work alongside any investment preferences you may have – your ethical position, for example. It should take advantage of any tax efficiencies that can be made too.

One important aspect that you should consider is how you feel about investment risk. All investments in stocks and shares carry an element of risk, but there is no need for you to take any more risk than is comfortable for you. Your portfolio can be built to match your investment risk profile.

When investing, diversification is normally important. The old saying of not putting all your eggs in one basket remains as true as ever. This means that if a particular sector of the market were to struggle, your portfolio would have some resilience. However, that doesn’t mean you should spread your investments too widely either – there are challenges with over-diversification too.

Investment values change over time and it is normal for portfolios to go up and down. It’s essential that you see investing as a long-term process and to plan carefully if you might want to access your funds at any given point. It’s equally important to keep your portfolio under review and to adjust it as necessary, so that it continues to keep on track at different stages in your life.

Portfolio management is a service offered by financial advisers whereby investment managers make changes to your portfolio as markets change to optimise performance and mitigate potential losses. This service may be provided as an add-on from a third party or, as with Smith & Pinching, can be an integral part of their investment advice service.

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Any opinions expressed in this article do not constitute advice. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

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