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The new year can be a great opportunity to take stock of your investments. Whether you are doing it yourself or with the help of a financial adviser, an annual review is a good time to revisit your assumptions and fine-tune your portfolio if need be.

Given the tough year that investors have experienced in 2022 and the difficult economic conditions that will continue to characterise 2023, here are six considerations to help you keep your portfolio on track.

1. Stay invested, stick with your plan

First and foremost, continue to keep your discipline. Studies have shown that the experience of a loss is psychologically more intense than that of an equally sized gain1. So, the drop in global markets last year may have been particularly distressing for some investors. 

But now is not the time to deviate from your plan. It might feel counter-intuitive to stay invested when markets are falling in value, particularly if you think these losses could get worse before they get better. With interest rates rising, cash may also seem more appealing right now.

However, it is important to remember that shares have historically been one of the best long-term hedges against inflation2 and that the real returns from cash are likely to be negative after adjusting for the corrosive effects of inflation.

Withdrawing from markets may also mean crystallising losses and forgoing significant gains that could bring you closer to your investment goals. Just a few days out of the market can be costly. For example, from 1928 to 2021, there were more than 23,300 trading days in the US stock market. Out of those, the 30 best trading days accounted for almost half of the market’s return.

Annualised returns of US stock market from 1928 until 2021-end

Past performance is no guarantee of future returns.
Source: Vanguard calculations, using data from Macrobond, Inc, as at 31 December 2021. Notes: Returns are based on the daily price return of the S&P 90 Index from 1 January 1928 until the 31 March 1957 and the S&P 500 Index thereafter until 31 December 2021 as a proxy for the US stock market. Returns calculated in US dollars. The returns do not include reinvested dividends, which would make the figures higher for all bars.

2. Consider rebalancing your portfolio

Staying the course doesn't have to mean standing still, though. Given how much markets have moved in the last 12 months, it may be that your mix of shares and bonds are now out of kilter with what you originally targeted.

Research has shown that it is your mix of assets that will most likely determine your long-term investing success3, so it’s important to get this mix right and to periodically adjust it, if need be. We call this rebalancing.

Some all-in-one multi-asset funds, like our LifeStrategy or Target Retirement fund ranges, do this automatically. But if your portfolio is made up of different funds, you may have to do this manually. The diagram below shows how an investor could do this by selling one type of investment and buying another.

Manually maintaining your targeted balance

Source: Vanguard.

Another way to redress the balance would be to direct any new cash contributions to those fund holdings that have underperformed.

3. Reassess your goals and risk tolerance

Have your goals changed? Is your plan still fit for your purposes?

A poor year of investment returns does not justify making changes to your portfolio, but a change in your personal circumstances or goals may do.

If you have been able to bring forward some goals, or perhaps feel that you have to delay some, for example, this could lead to change in your asset allocation.

4. Are you investing enough and investing regularly?

Reconsider whether you’re investing enough to reach your goals.

Would you, for example, achieve a superior outcome by setting up a direct debit and regular investment plan rather than investing irregularly with ad hoc lump sums when the mood caught you? Might you also benefit more from pound-cost averaging this way?

And if you are investing for retirement, what impact will the rising cost of living have on your target income and are you saving enough to achieve it?

There’s always a trade-off between the scale of your ambitions and the amount of money you invest to attain them. So, if you find that your plan is not on track to get you where you want to be, consider lowering your sights if you can’t increase your investments.

5. Review your costs

All our research and experience at Vanguard tell us that costs play a crucial role in investor success, so it pays to keep costs low. Whether invested in an actively managed fund or an index fund, each £10 paid in costs by an investor is £10 less received as a return.

Sounds small but over time it can make a really big difference to your wealth. And the tougher the investing environment, the bigger the proportional impact of an investor’s costs on their final return.

You can’t control how markets behave but you can control your costs. So, if you can save money on your investments, consider doing so – whether that means transferring to a lower-cost investment platform, lower cost provider of individual savings accounts (ISAs) or consolidating your pensions within a low-cost self-invested personal pension (SIPP).

6. Make the most of your tax allowances

Tax too is a cost and a drag on your investment returns. So consider making the most of your annual ISA and pension allowances – not just what is still available to you this tax year, which runs out on April 5, but also any unused allowances on your pension savings from the previous three tax years.

For 2022/23, these allowances are capped at £20,000 (adult ISAs), £9,000 (Junior ISAs) and 100% of your gross annual earnings up to a maximum £40,000 (pensions).

All give you the potential for tax-free income and capital growth. You can also boost your pension contributions at no extra cost to you with tax-relief set at your highest marginal rate of income tax.


1 Kahneman and Tversky, 1979.

2 Source: Vanguard’s framework for constructing globally diversified portfolios. Nominal and real returns of Treasury bills, bonds and shares in local currency from 31 December 1900 to 31 December 2020. Calculations using Dimson-Marsh-Staunton global returns data from Morningstar, Inc. (DMS UK Equity Index, the DMS UK Bond Index, the DMS Europe Equity Index, the DMS Europe Bond Index).

3 Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower, 1995. "Determinants of portfolio performance." Financial Analysts Journal 51(1):133–8. (Feature Articles, 1985–1994.)

Investment Risk Information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Any tax reliefs referred to in this article are those available under current legislation, which may change, and their availability and value will depend on your individual circumstances. If you have questions relating to your specific tax situation, please contact your tax adviser.

Important Information

This article is designed for use by and is directed only at persons resident in the UK.

For further information on the fund's investment policies and risks, please refer to the prospectus of the UCITS and to the KIID before making any final investment decisions. The KIID for this fund is available, alongside the prospectus via Vanguard’s website

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The Authorised Corporate Director for Vanguard LifeStrategy® Funds ICVC is Vanguard Investments UK, Limited. Vanguard Asset Management, Limited is a distributor of Vanguard LifeStrategy Funds ICVC.

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