Phil Beck, Independent Financial Adviser with Smith & Pinching, offers some expert advice on investment risk portfolios in the time of coronavirus.

North Norfolk News: Phil Beck is an Independent Financial Adviser with Smith & Pinching, Chartered Financial Planners Picture: Smith & PinchingPhil Beck is an Independent Financial Adviser with Smith & Pinching, Chartered Financial Planners Picture: Smith & Pinching (Image: Archant)

The value of my investment portfolio has significantly reduced over the past year, although it is much better now than it was in April. It’s made me realise just how precarious investing can be and I’m worried about there being more crashes to come as we don’t seem to be out of the Covid-19 crisis yet and many commentators are predicting a lengthy recession. I realise that investing is about taking a long-term view but I’m concerned about putting money aside if it’s not going to grow over the years. What do you think?

Phil Beck of Smith & Pinching responds:

Yes, 2020 has certainly been a challenging year so far! However, you are absolutely right that it’s important to look at investments from a long-term perspective.

Markets are indeed still relatively low at the moment, but they have recovered a lot from the falls they experienced through March and April this year and there is every reason to suppose they may recover more value over time – although of course this is never guaranteed.

The first thing to say about your investment portfolio is that it needs to be aligned with your investment risk profile so that you are not taking more risk than is comfortable for you.

Taking independent financial advice about your portfolio will ensure that your investment risk profile is assessed and that the overall investment risk within your portfolio is both suitable for you and is meeting your financial objectives.

It is also important to regularly monitor and review the investment assets within your portfolio to ensure they are continuing to meet your expectations in terms of performance. However, adjusting a portfolio to optimise returns is not something we recommend you do yourself, unless you are an expert.

Discretionary portfolio management is a service where investment specialists do the job for you. They constantly watch market indicators to make informed decisions about the future performance of the content of your portfolio and change it accordingly. It’s called discretionary because you give the portfolio managers the authority to use their discretion to make what changes are needed.

For many investors, the most cost-effective form of portfolio management is via model portfolios. These are investment portfolios that are designed to align with a specific risk profile that can be matched with the investor. These portfolios are regularly ‘rebalanced’ within the parameters of the risk profile so are adjusted as needed to maintain optimum performance.

Portfolio management can be offered by a third party working alongside your financial adviser or – as is the case throughout the Smith & Pinching Group – it can be an integral part of the investment advice service offered by your advice firm.

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.