A yearly review checks allocation, concentration, costs and whether holdings still match their purpose. Doing it on a schedule, in writing, prevents both neglect and reacting to every market move.
9 min read · Level 2
The most valuable line in a portfolio review is usually the one that records a decision to do nothing. It proves the portfolio was examined rather than neglected, and it is the only way to tell later whether inaction was a considered choice or an oversight. I think investors who write that line are also less likely to make sudden changes between reviews, because they have a record of having already thought it through.
A portfolio review asks a short, fixed set of questions once a year:
1 Allocation does the split across asset classes still match the plan 2 Concentration has any position or theme become too large 3 Costs what am I paying in fees and charges 4 Purpose does each holding still serve a reason I can state 5 Changes in life have goals, income or time horizon changed 6 Actions the smallest set of changes that fixes what is out of line
Drift is the usual finding. Assets that performed well grow into a larger share:
Asset class Target After three strong equity years Equities 60% 72% Bonds 30% 21% Cash 10% 7%
Nothing was bought or sold to reach 72%; the portfolio simply became more aggressive than intended. A review catches that, and rebalancing returns it to plan.
The review should also record what you did not change. A note saying the allocation was checked and left alone is a result, not a wasted meeting.
Annual is a reasonable default for most private investors. More frequent reviews tend to produce more trading, which adds costs and, in taxable accounts, tax events.
Because portfolios drift silently. Without a scheduled check, allocation is decided by whatever performed best recently, which is the opposite of a plan.
A fixed schedule also protects against the other failure: reacting to headlines. When a review is due each year, market noise in between has a smaller claim on your attention.
Educational, not personalised financial advice. Nothing in the Investor Academy is a recommendation to buy, sell or hold anything — what is right for you depends on your own circumstances and the rules where you live.
A review that produced two changes and one deliberate non-change.
Finding Action Equities drifted from 60% to 72% sell enough to return to 62%, within the tolerance band One technology holding now 14% of portfolio trim to 8%, the stated maximum for a single position Fund fees of 0.85% on a large holding switch to a comparable fund at 0.15%, checking tax first Bond fund lagging a peer over one year no change; one year is not evidence, purpose unchanged
The investor wrote one paragraph on each decision and the date of the next review. The following year, that record made it easy to see what had been decided and why.
Reviewing a portfolio by looking at recent performance and changing whatever lagged, rather than checking allocation, concentration, cost and purpose against the plan.
Choose one date a year, and avoid reviews immediately after large market moves.
Compare current allocation with the plan, and use a tolerance band rather than exact percentages.
Find your largest single exposure and total ongoing charges.
One line per decision, dated, so next year's review has a record.
Annually, and after a major change in your goals, income or family situation.
Do not review in the week of a sharp market move. Decisions made then tend to reflect the move rather than the plan.
After long periods of strong performance in one asset class, advisers commonly report client portfolios holding far more of it than their stated plans intended, with the change caused entirely by performance rather than deliberate decisions.
Drift moves a portfolio toward whatever has already risen, which is the opposite of rebalancing. A scheduled review is what catches it.
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