Conducting a thorough review of your investment portfolio is a crucial task for any saver or investor. Christine Benz, Morningstar's director of personal finance and retirement planning, has outlined an eight-step process to help you achieve an improved, streamlined, and more tax-efficient portfolio. She advises tackling these steps over several sessions rather than all at once.
Laying the Groundwork and Assessing Your Position
The first step is to gather all your financial documentation. This includes current investment statements, plus details on your State Pension and any other pension entitlements. A professional tip is to set up a government gateway account to access your State Pension forecast and National Insurance record for a clear overview of your benefits.
Next, you must ask the fundamental question: How am I doing? To gauge if you're on track, review your total portfolio balance alongside your savings rate. Tally contributions across all accounts, aiming for a baseline rate of 15%, with higher earners targeting 20% or more. Factor in other goals like university funding or a house deposit, ensuring they are realistic and don't compromise your retirement.
For those in or near retirement, the key metric is your withdrawal rate—planned annual withdrawals divided by your total portfolio. While the 4% rule is a common benchmark, aiming for a lower rate is advisable where possible.
Optimising Asset Allocation and Streamlining Holdings
Step three involves checking your long-term asset allocation. Does your mix of stocks, bonds, and cash align with your targets? High-quality target-date funds, like those from Vanguard, can serve as useful benchmarks. A portfolio heavily weighted toward equities may suit younger investors, but if you're within a decade of retirement and equity-heavy, shifting towards bonds and cash becomes more urgent, mindful of potential tax consequences.
Assessing liquid reserves is vital. Holding cash is crucial to avoid tapping investments or using credit in a crunch. Retirees should consider holding six months to two years' worth of portfolio withdrawals in cash, while those still working should aim for three to six months' worth of living expenses.
You should also examine suballocations, sector positioning, and individual holdings. While broad asset-class exposure drives performance, your choices within each class matter. Review whether growth stocks have overly dominated your portfolio compared to value, and check your sector and geographic diversification.
Enhancing Tax Efficiency and Managing Risks
Step six focuses on streamlining. Consolidate multiple old workplace pensions or ISAs where possible to simplify management. Consider whether you could reduce the number of holdings; index funds and ETFs offer broad diversification in a single, low-cost package. Target-date funds are also excellent for smaller accounts requiring hands-off diversification.
Managing for tax efficiency is paramount. If you decide to make changes, prioritise selling within tax-sheltered accounts like ISAs or SIPPs to avoid immediate tax liabilities. Within taxable accounts, always review the capital gains tax implications or seek advice first. Ensure you're maximising contributions to tax-advantaged vehicles and holding tax-efficient investments like equity ETFs or municipal bonds in taxable accounts. Plan your withdrawal sequence for tax efficiency in retirement.
The final step is to troubleshoot other risks. For many, uninsured long-term care costs pose a significant threat. Developing a plan for potential future care needs is essential. Another common risk is providing financial help to family members. Consulting a financial adviser can help you structure support without jeopardising your own financial security.
This guidance was provided to The Associated Press by Morningstar. Christine Benz published this eight-step plan on Wednesday, 14 January 2026.
