How to spring clean your portfolio

There is a lot of volatility in markets right now with big moves down and up, and plenty of uncertainty. If you are looking to use fresh ISA and pension allowances for the new tax year, that can at least offer some opportunity. You are fortunate enough to have some dry powder to invest to buy the dip in markets for the longer term.

Occasions when markets are falling and the stock market is headline news tend to be good times to buy over the long term – as Warren Buffett put it “Be greedy when others are fearful”. Clearly the current tariff developments are a fast-moving situation, and we’ll have to see what pans out, but if you have no plans to cash in your investments in, say, the next five to ten years – or even longer – you can likely afford to ride out the volatility.

It’s therefore a time for sticking to your plan. Rather like the Covid-led volatility we saw five years ago, the path from here is unclear. But these sorts of episodes tend to give rise to an opportunity to stock up on investments for the longer term. While we always point out that past performance is not a guide to the future, you only tend to get those good opportunities in moments of great uncertainty – which ironically is why it’s so difficult psychologically to harness them.

In the short term, with fast moving trading conditions, and a variety of political and economic outcomes, some caution is warranted. It’s not realistically possible to time the market with any accuracy with what is happening. But if you are looking to invest there is comfort that in the long run it’s the length of time you commit to that matters far more than the precise point you buy in. The longer you invest for, the more that is the case. So don’t get too hung up on the timing side of things when looking to commit new money. Think about the next decade, not just what’s happening right now. And only buy something if you are happy to own it long term.

If you are concerned about big market moves, look to phase your money in, either by making monthly contributions, or adding money to ISAs or SIPPs in the form of cash to use the allowance and then buy investments in chunks. That will average out the price you buy the investments. The monthly approach also takes the thought and emotion out of things, and that can be a good thing when markets are moving around very quickly.

You could look to limit the volatility of the stock market with more stable dividend-paying stocks, perhaps via an equity income fund for diversification. Companies that pay regular and growing dividends tend to be more stable, and they offer regular income that can be reinvested, so a portfolio biased towards those tends to be that bit more resilient in more difficult times, but it can still capture a market rally as and when that takes place.

It's also worth noting that market volatility like we have seen can either validate or invalidate your approach to risk. It can really expose the true amount of risk you are taking. This can be a shock and if it’s the first time of experiencing that, if you are a newer investor say, it can be pause for thought. Do you need to alter things? Not immediately, it’s too fast moving a situation for that, but in the medium term to take account of this experience. Any top ups to your ISA or pension allowances can reflect that too.

With all this in mind, how can investors ‘spring clean’ their portfolio?

Check your portfolio is diversified and balanced

Overall, we believe it is a time for sticking to well-established investment principles: Diversifying appropriately and committing for the longer term. Investors should have a varied portfolio that insulates them as far as possible from the impact of different economic scenarios, which are particularly wide-ranging. Diversification means spreading money across investments a mixture of asset classes, countries, and investment styles, so not to be overly reliant on certain ones.

It may be your portfolio has become increasingly reliant on the US, and tech stocks in particular, and as recent market moves show it makes sense to spread your money around as different markets perform at different times. It is notable that unloved, cheaper areas have been among the most resilient in this year’s sell off. Going forward we do expect far less dominance of the US big tech stocks as a block which would mean investors won’t be penalised for taking a more diverse approach.

The other good news for investors is that some of the diversification benefits of the two main asset classes, shares and bonds, have re-established themselves. Bonds stand to benefit if deteriorating economic conditions ultimately result in subsiding inflation and a lower trajectory for interest rates. Meanwhile, equities offer the prospect of better returns from a benign economic scenario and, perhaps whatever the outcome, some exciting longer term structural themes.

You should be aware that after you buy a selection of investments to fit a certain objective and asset allocation you are happy with, your various holdings will perform differently. If one or a number become a significantly larger proportion of your portfolio it could mean additional risk. It can therefore be prudent to bank profits and use the proceeds to top up in areas that have underperformed. This can retain the intended balance of your portfolio and helping smooth out returns. There’s more detail on how to review your portfolio in our previous article.

Checking your portfolio periodically can help you focus on any changing circumstances and help ensure you are on course to meet your objectives. It’s also essential to keep tabs on your different holdings to ensure they are performing as expected, or whether any improvements could be made.

If you are looking to make this process easier, ‘multi asset’ funds such as our own range can offer a handy way to access a diverse portfolio covering lots of different areas – equities, bonds and other areas – in a single investment. They are monitored and rebalanced by our investment experts, and there are no platform charges or trading costs on them through Charles Stanley Direct.

Be an ISA early bird

When you invest your money, it’s vital to make use of tax allowances. Individual Savings Accounts – or ISAs – are often a first port of call owing to their convenience and flexibility.

While many people leave their ISA contributions until the end of the tax year, it is often better to use the allowance early. That way your chosen Stocks & Shares ISA investments are sheltered from tax immediately and have longer to produce income and growth. However, it is also possible it could work against you should they fall in value over the course of the tax year. There’s more on the potential benefits of being an ISA early bird in my previous article here.

For the 2025/26 tax year the ISA allowance is still £20,000, but don’t worry if you don’t have a large lump sum to invest right away. With Charles Stanley you can contribute smaller amounts to our Stocks and Shares ISA whenever you like, or set up regular savings from your bank account. This can also help counter the market ups and downs, as well as take some of the stress out of investing because you are putting money in at different levels. It can even turn market volatility to your advantage as you average down if prices fall further in the shorter term.

Power up your pensions

Pensions are an important consideration for everyone looking to secure a comfortable retirement and a powerful way to invest. When you contribute to your pension, the government adds money. This is called tax relief and it can supercharge your long-term returns.

An investor can receive up to 45% tax relief when they make a contribution to a personal pension such as a SIPP (Self Invested Personal Pension). A top up of 20%, representing basic rate tax relief, is automatically paid into the pension and any higher and additional rate income tax is reclaimable. This can represent a big boost to your money, and an uplift that would otherwise only come with lots of risk or a long time investing in markets.

Check how pension tax relief works here.

Take a look at our investment ideas

If you are looking to invest new money or to rebalance your portfolio, and are looking for some fresh inspiration, our Preferred Fund List offers a selection of ideas for the consideration of those who wish to make new cash investments.

Compiled by our experienced Collectives Research Team, the list is designed to provide a helpful shortlist of investment options for those undertaking their own research and seeking ideas for exposure to certain sectors as part of a diversified portfolio. You can filter by each sector, as well as active or passive investment type, and find options for responsible investing.