Is your ISA fit for purpose?

Q: My ISA portfolio has developed into a ragbag of all sorts. How do I start to work out whether I have the right funds?

The good thing about a portfolio - whether it’s for your Stocks and Shares ISA or a Self-Invested Personal Pension (SIPP) - is that they’re flexible. In only a few working days it’s possible to buy, sell and switch the investments you hold.

Of course, I’m not suggesting you chop and change whenever a bright new shiny ‘thing’ comes along. Investing is for the long term - at least five years. But equally we’re all human. And if an opportunity presents itself, it’s only natural you want to take advantage it.

Over the years, however, it can result in exactly the situation you find yourself in. Don’t worry, here’s my checklist of questions you should ask yourself if you’re wondering if your ISA (or SIPP for that matter) portfolio is feeling as though it’s got a little out of control.

Ask yourself:

• What’s your investment objective for this portfolio? Growth or income?
• What are your goals? What is this money to be used for (property purchase, a child’s wedding, retirement plans)?
• What’s the time horizon? When do you think you’ll be drawing on this?
• What other savings and investments do you have outside of this portfolio? Do you have portfolios of different risk elsewhere?
• What’s your risk tolerance on a scale of 1-5? To help you put this in context, I’d generally say that at the lower end ‘1’ aims to marginally beat inflation (of course with the sustained periods of high inflation rates that we’ve seen this has been a tall order). Whereas ‘5’ is at the top end, where you are comfortable that you understand that markets ride in cycles and you’re happy to ride out 30-40% drops.
• How do you feel when there are big drops in the market?
• How confident are you when it comes to investing, and how did you put your current portfolio together?

How to look under the bonnet of your portfolio

If you want to understand on a deeper level what you’re invested in, you can put your portfolio under a microscope. Here’s how.

First, log in at fidelity.co.uk. Then select the account that you’d like to review and pick a Benchmark to compare it against (I wouldn’t worry too much about this, you just need a comparison. If in doubt, I’d go for the MSCI World PR USD - but you can learn more about the individual benchmarks when you select one from the list).

This will pull up on an online analysis. To access and download the full X-ray report, click on ‘Export’.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.