Are you a hands-on or hands-off investor?

When you look around at your friends or family, most people will likely fall into two camps: those that are ‘hands-on’ and those that are ‘hands-off’.

Stereotypically, this the difference between those who take the lead of planning every single element of their group holiday, mapping out routes to the best bars and restaurants they made reservations for weeks ago, while the others are simply turning up to the airport, glad the decision making has already been done for them.

In the investing world, there’s a similar phenomenon of ‘high or low maintenance’ portfolios, distinguishing how much time and attention your portfolio demands to keep it on track.

So, what type of portfolio do you have, and what does it mean for its needs? Figuring out which type of portfolio you hold requires an understanding of its risk profile.

Low vs high maintenance and risk

A high maintenance portfolio is high risk because it has little diversification or fewer different assets.

Let’s take two different examples.

Investor A, Abbie, invests in a multi-asset fund and investor B, Billy, owns just a few individual companies, say FTSE 100 names BP and Shell as well as some US tech, Nvidia and Meta.

Abbie’s portfolio would be classed as low maintenance, whereas Billy’s would be high maintenance.

This is because in Abbie’s multi-asset fund, she will own a mixture of stocks and bonds, likely in different regions around the globe. This broad approach makes it unlikely that a single event will affect all the investments she holds in a similar way, creating a smoother investor ride because they can balance each other out.

The timeline that really matters for investing

Stocks and bonds are traditional diversifiers. Stocks aim at achieving higher growth and returns making them more high risk, while bonds are designed for a smoother ride, which can help lessen some of the losses if stock markets wobble.

Multi asset funds, like AJ Bell’s own Managed fund range or the Vanguard LifeStrategy range, create exposure to hundreds or thousands of different companies through a single investment.

So, if tech stocks are having a bad day because of US tariffs or UK equities wobble around Budget nerves, the idea is that only part of her portfolio is impacted.

This allows her to be low maintenance as her investments can ride out inevitable market volatility more consistently, allowing Abbie to sit back.

Billy, meanwhile, has a much higher risk portfolio, being invested in just four stocks. A bad day in the market likely means more panic for Billy, who might feel the need to make some quick changes to his portfolio.

A high maintenance portfolio can easily become a bit of a full-time job. Because it’s small and concentrated, a single bad day in the market can mean big losses. There is also the opportunity for massive gains, but often with a lot more risk.  

Is your ETF really that cheap?

For example, Billy's portfolio of four admittedly very well-known and reputable companies could achieve big returns for him, but if things went awry for even one of these names, or a geopolitical event affected them (like the US-Iran war), it could wipe out any gains quickly.

There's also a practical time management disparity here as you’ll need extra time to monitor your few holdings and the discipline of when to avoid emotional buying or selling, versus Abbie being able to buy and hold and check in and adjust every now and again.

While everyone has their own approach to investing, it's important to consider how much work you are willing to commit to one outcome and how you are achieving that.

For some people, managing a portfolio is a bit of a hobby, in the same way some people might enjoy researching restaurants and hotels. Even if you’re handed in other parts of life, you don’t need to feel obligated to be hands on with your investments. Having a diversified portfolio, you feel comfortable sticking to is key to being a successful investor, and many of us prefer to leave it up to the professionals.