One of the perks of investing is that it doesn’t require much work to be successful. In fact, an industry adage is to ‘invest and forget’. But doing a check under the bonnet once in a while ensures that your investments are still serving their purpose.
You can view this like a visit to the dentist. Once or twice a year, you head in to identify any issues that could cause a bigger problem in the long term. This same thinking can be applied to your investments, but luckily, you can complete this check from the comfort of your home with a warm cuppa instead of mouth agog in a dentist chair.
Most of these checks will be geared at people who invest in funds. If you invest in individual stocks, you might find yourself needing to do more frequent checks to keep on top of markets. But for those that invest largely or exclusively in funds, most experts say that once or twice a year does the trick.
Are your funds keeping up with their peers?
The funds you invest in are just a few of a multitude of options, and it’s helpful to check if they are still providing you with the best possible returns compared to similar options. This judgement will be slightly different for funds managed by a team of experts (active funds) or those that follow an index (passive funds).
Active funds will have a much larger range of performance figures because they have the freedom to invest in different companies. But you can still compare them to a peer group. For example, a fund that invests in UK companies can be compared to other funds investing in UK companies, or to the FTSE 100 index. Since your goal by investing in active funds is often to beat the index, this can be a helpful check.
You can do this by using the AJ Bell fund screener. Once you find your fund and click on its page, you will see a section labelled performance on the right-hand side. Here, it will show you the comparison of ‘fund’ and ‘category’. You can click on the different time periods above to show how the returns match up over time. The ‘category’ heading represents the average of other funds in the peer group. If that performance is far ahead of your fund, then you might consider looking for other options.
However, if a fund is underperforming over a short time period, it’s worth having a look at the three, five and 10-year returns before you jump ship. No fund will be on top all the time, and past performance doesn’t guarantee future returns. But if your fund is underperforming on quite a few of these time periods, it could be time to look elsewhere.
If you invest in passive funds, which follow an index, there should be relatively little difference between the performance of different funds as they are all following the same stocks. However, some funds have savvy ways of trading that create slight differences in return.
For example, all of these funds track the MSCI World, which has a total return of 4.3% year to date. But because of their fees and trading methods, the returns differ slightly.
Are your fees out of range?
The mantra ‘you get what you pay for’ is not always true when it comes to funds. Funds with lower fees will often outperform those with higher fees. Actively managed funds tend to have higher fees than passive, so you’ll want to make sure that you truly feel your active funds are adding value to your portfolio.
The average fee of a passive fund that tracks global equity markets is 0.2%. If your tracker fund is charging well above this rate for standard tracking and it’s eating into performance, it may be worth looking at other options. Check the other funds that track the same index to see if your fund is charging more than its peers.
For active funds, the average fee is 0.64% for global equities. Active fees can vary a lot more, so examine this metric in combination with your performance. Sometimes, a high fee is okay if you’re getting great returns, but if it’s eating away at an average return, you could be better off switching to a passive option or another active fund.
Are your investments working together?
Each piece of your portfolio can serve a slightly different purpose to build the perfect balance for you. You may invest in some areas for growth, some for stability, and others for income. However, over time markets can change and stop serving your original purpose.
This could be the case currently for some government bond investors. Many people who invest in government bonds are looking for stability in their portfolio, but this asset class experienced large drops in price at the same time that equity markets fell during the US-Iran conflict. This did not provide investors with the protection they were looking for.
Read what happened to three markets in US-Iran War
Realistically, it’s not possible to create a portfolio of investments that will act exactly as you planned. But if they are consistently missing the mark, and you see other areas of the market that could do a better job, you may consider a switch.
Are you due for a rebalance?
Sometimes, parts of our portfolio will go through a period of much better performance than others. This can put our weighting a bit out of kilter. For example, those with investments in emerging markets enjoyed a strong growth period over the last year. But because that investment has grown so much in comparison to other bits, emerging markets automatically become a larger part of the portfolio. This imbalance could create issues for those who would prefer to hold the majority of their assets in lower-risk parts of the market.
Read more on rebalancing your portfolio
If you still like the original weightings you set for your portfolio, you might need to do some reallocation of assets. It can feel unnatural to take money out of a fund that’s doing well, but it might help to think of it a bit like gardening, where your different funds are a series of pots, and the money in each fund is the plant.
When the plant grows too big for its pot, you trim it down to a smaller size, and you can use those clippings to fill out another pot (fund) that was struggling. This creates a nice even garden, rather than having one plant wildly out of control, and the others struggling. Plus, by buying more of an investment that hasn’t performed as well, you could be buying in at a more attractive valuation, while by selling strong performers you could be scaling back exposure from crowded trades that may have run their course and locked in some healthy gains.
Hannah Williford: Content Writer
Hannah joined AJ Bell in 2025 as an investment writer. She was previously a journalist at Portfolio Adviser Magazine, reporting on multi-asset, fixed income and equity funds, as well as macroeconomic impacts and regulatory changes...
