Reviewing your portfolio - Investment Guides from The Share Centre

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Reviewing your portfolio

Once you have invested in a share, that's not the end of it. At some stage you will want to sell to realise cash to spend or invest elsewhere. The worst thing you can do is to buy and forget.

Here we look at the need to look at your investments and factors that might affect their performance.

Investments aren't for life

Shares and funds aren't for life. Increased competition in all market sectors has meant that many companies have had to adapt and move with the times. This uncertainty has effectively put an end to buying an investment for life - a blue chip company today, might not necessarily be a blue chip company tomorrow.

While companies may change, the reason for buying into them shouldn't. Whether you buy for income, capital growth or a balanced return, if the investment isn't doing the job - you might consider selling it.

Ensure you don't fall foul of any emotional attachment that can develop with investing. Just because you once worked for a company or regularly shop at a certain store doesn't necessarily mean the business is a good investment.

It's worth reviewing your investments regularly to ensure the companies you've invested in are still attractive.

Helpful tip: If you find a share or fund that offers the potential to perform better than one of your existing investments, consider switching. Holding on to poor performing investments simply prevents you from investing in more promising opportunities you may have identified.

What if my investment doesn't move much?

Be patient, often a share won't move for many months after you have bought it. And even highly recommended shares might stall for a while. It often pays to be patient.

In the case of a share tip based on the launch of a new product for example, you could well benefit from getting in there early but the market may be slow to react until the product is actually live and selling well.

Remember the reason why you invested in the first place and the time horizon you set.

Maximise your investment performance using limits and alerts

Just like setting a target level to determine when might be a good time to sell your shares, you can also set a loss level. Again, you don't have to sell, but it might indicate a good time to review your holding.

Setting a stop-loss limit will trigger a sell if a share price falls to the level you have specified.
You can also be notified when a share hits a certain price using an alert. Visit our Limits and alerts section for more information.

What are the directors doing?

Keep an eye on the directors, theoretically, company directors should understand their businesses and be able to judge their potential better than those outside the Board room.

There are all sorts of reasons why directors may choose to buy or sell their shares. The general rule of thumb is that it is more productive to follow directors' buying behaviour than their selling, as there can be various reasons behind a sale. For example, directors may be locking in some profit, or raising cash to meet a tax liability or a divorce settlement, whereas they are only likely to buy if they think that the company's shares are likely to rise.

Don't look at directors' deals in isolation. Look at the company's performance figures and check for any corroborating evidence in the news before making a decision to invest. Also, see if groups of directors have been buying or selling their company's shares.

Helpful tips: When you look up an investment on our website, click on 'director deals' to see if they've been dealing in their own company's shares.

What factors might affect my investment?

Be aware of trends, while past performance is no indicator of future performance, it is possible to identify trends which can suggest where a price might go. The trend most investors are interested in is the share price. And one of the easiest trends to spot is the movement of a share price within a certain range - the price never falls below a certain level and never rises above a certain value.

Should this apply to one of your shareholdings, a good time to sell might be when it is moving close to its traditional high.

Seasonal consumption, shifts in technology, changing consumer habits can also influence trends in share dealing, so give some thought to these too. Additionally, cross-referencing the volume of shares traded with share price movement in a given period, may also indicate a trend that you may wish to take advantage of.

A useful way of identifying trends is by studying charts that highlight the 3 month and 6 month day moving average.

Can I maximise profits and minimise losses?

Maximise profits, minimise losses, even if you have good reason to like a particular company, things can sometimes go wrong in the short term. A profit warning, for example, can hit share prices hard. It may be worth selling your shares at this point, with a view to buying them back at a lower price. 

Set up a limit purchase order to enable you to buy back in when the price is acceptable. Or, if you just want to keep an eye on it, you can add the share to a watch list. Once you've registered and setup a free practice account, you'll have free access to a watch list. It's easy to set a target using limits and alerts.

How do targets help?

One way of deciding the right time to sell your shares is by setting a target level when you buy them. Setting a target doesn't mean you have to sell, but it does act as a reminder to review the situation.

What do brokers say?

Get a second opinion, once you have decided which investment you want to sell, it is always a good idea to get a second opinion. Keep an eye on market news and reports, lookup your investment using Find other investment and read 'Broker consensus analysis'. Bear in mind however, brokers may have a different time horizon and strategy compared to your investment philosophy.

Customers can also call our Advice team. Unlike other stockbrokers we don't charge extra for the expert advice we give our customers. We also run an active and friendly Investors' Forum for our customers to share news, views and strategies. More experienced investors are happy to give help and share their experiences with novices starting out on their investment journeys. The forum is available from 'my account' once you've signed in.

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