How to perform an investment MOT amid market volatility

Much like a car, your investment portfolio needs a thorough check-up from time to time to ensure it remains fit for purpose and stays aligned with your financial goals, time horizon and risk appetite.

The start of a new tax year can be an opportune time to review your investments, following the resetting of the annual allowances of the ISA and pension allowance tax wrappers. 

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Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “This year’s financial spring clean season has been shrouded by heightened market volatility stoked by Donald Trump’s tariff wars, which can make even the most seasoned investors uneasy.

“In such times, doing an investment MOT becomes even more crucial, not less. Rather than reacting emotionally or making knee-jerk decisions, use the opportunity to re-centre. Are your investments still diversified enough to weather unexpected shocks? Is your portfolio too concentrated in areas directly impacted by trade tariffs, like tech or manufacturing? Staying invested is often the right call, but a check-up can reveal whether a bit of rebalancing or a tweak to risk exposure might help smooth the ride.

“An investment MOT doesn’t need to be overly technical or time-consuming. It’s about being intentional and making sure your money is working for you, not just sitting in the background. Like servicing a car, a little upkeep now can prevent bigger problems later.”

Myron Jobson outlines interactive investor’s tips on how to broach an investment MOT amid a period of heighten market volatility.

1) Check your financial goals

“Before you even look at your portfolio, take a step back. Have your financial goals changed? Are you still investing for retirement or a house deposit?

“Knowing what you’re investing for, and when you’ll need the money, helps you decide whether your current approach is still fit for purpose.”

2) Assess your asset allocation

“This is the engine room of your portfolio. Are you still happy with the balance between equities, bonds, cash and other investments? The recent bout of heightened market volatility has laid bare the perils of being overly exposed to a particular region or sector. The ‘Magnificent Seven’ tech stocks (Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla) account for around 18% of the FTSE All World index. The fortunes of these stocks will deliver a greater effect on funds tracking the index than the entire allocation to the UK, which is just 3.52% of the FTSE All World index.

“Diversification is critical to good investing theory, so if you already hold a lot of US tech stocks, you need to think about how including an investment in your portfolio will affect your overall diversification and exposure to economic shocks that could affect the US' performance.

“If you’re nearer to your goal, you might want to shift to a more cautious stance to protect what you’ve built. If you’ve got time on your side, you might lean into growth”

3) Consider rebalancing your portfolio

“Portfolio rebalancing is akin to tuning an instrument, where every component plays a crucial role in achieving harmonious results. Sometimes rebalancing can happen of its own accord because of market movements. 

“By rebalancing your portfolio, you will avoid the drift and align to your original asset mix. There is not a hard-and-fast rule on when it comes to rebalancing, but investors could benefit from making a habit to revisit their investment allocations annually or bi-annually.”

4) Review performance - but don’t obsess

“It’s tempting to focus on recent winners or losers, but don’t get too caught up in short-term noise. Look at performance over a meaningful timeframe – five-plus years and compare it to an appropriate benchmark or peer group.

“Underperformance doesn’t always mean something is broken - but it’s worth digging into the ‘why’.”

5) Check fees and charges

“Platform and investing fees matter. When it comes to platform fees, percentage-based charging means the more you invest, the higher your fees. In contrast, a flat fee remains constant and predictable. For larger portfolios, the difference between flat fees and percentage-based charges can be striking.

“A lot of column inches are dedicated to the impact of compounding over time on investments and how it helps stimulate growth, which is important for investors to make the most of, but the opposite is also true when it comes to fees dragging the portfolio back. 

“While investors can’t control the returns they achieve, they can control how much they pay for investment platforms.”

6) Tax-efficiency tune-up

“Are your investments held in the most tax-efficient way? Using your ISA and pension allowances can shield your returns from the taxman. And with changes to capital gains and dividends tax thresholds, it’s more important than ever to make use of these wrappers.

“It’s worth ensuring that you are making the most out of the tax wrappers - especially if you’ve had a pay rise, changed jobs or inherited money.”