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After saving and investing for many years, you might feel a mixture of excitement and trepidation as you approach the day when you can finally achieve one of your financial goals.

Whether it’s retiring, funding your child’s university education, or helping the next generation onto the property ladder, the fruits of your labour will have at last paid off.

However, tapping into an investment portfolio you’ve spent years growing may feel daunting, and it’s not something you want to get wrong. Making a mistake could prove costly and put your plans at risk.

RBC Brewin Dolphin’s team in Wales can help you manage your portfolio, understand your options, and advise on the right solution for you. In the meantime, these are some of the key considerations.

Reviewing your portfolio

Ideally, you should start preparing your portfolio three to five years before you want to start drawing money from it. This will give you time to make any changes in a gradual and controlled way. Planning ahead can help to mitigate stock market volatility, manage potential tax liabilities, and reduce the risk of you making investment decisions in haste.

Many people have several goals with different time horizons. When you’re reviewing your portfolio, it might be useful to split these goals into two or three ‘pots’ – for short-term goals, medium-term goals, and long-term goals. That way, you’ll be able to decide on an appropriate level of investment risk for each one.

For goals that are ten or more years away, you can probably afford to have a reasonable proportion of money invested in higher-risk asset classes like equities. History shows us that although equities are volatile, they tend to be the best performing asset class over periods of ten or more years.

For shorter-term goals, it’s important to make sure you’re not taking on too much investment risk. The last thing you want is for a stock market downturn to wipe thousands of pounds off the value of your investments just before you need to sell them.

Depending on your circumstances, lower-risk asset classes to consider may include cash, structured deposits, UK government bonds (‘gilts’) and corporate bonds.

Of course, life doesn’t always move in straight lines and sometimes unexpected things happen. This is why any review with us will always start with looking at what cash reserves you have and checking they create a sufficient buffer to protect you against the unforeseen.

Protecting against inflation

How much of your portfolio you shift into lower-risk asset classes will partly depend on how you plan to fund your goal.

Some goals might be funded by drawing a lump sum all in one go – for example, gifting your child a deposit for their first home, or buying an annuity to fund your retirement.

In the run-up to this type of goal, your main focus should be to preserve the investment’s value as opposed to looking for growth opportunities.

Other goals might be funded in a more gradual way, perhaps by withdrawing a set amount of money each month. An example could be paying for a child or grandchild’s school fees.

As your child enters the education system you might want to hold a few years of fees in cash. However, it’s also important that you can cover fees in the future. That may mean retaining some exposure to equities, which typically provide better protection against inflation.

Inflation is a particularly important consideration in retirement. If you’re leaving your retirement savings invested, you need to feel confident that they will go the distance. Your retirement may last for three or even four decades, over which time the real value of your savings could be eroded by rising prices.

Retaining some exposure to equities will give your retirement savings the opportunity to keep growing in real terms over the long term.

Managing tax liabilities

If you do need to reduce the level of risk in your portfolio, it’s important to be aware of potential tax liabilities.

One way of de-risking a portfolio is to sell equities and then reinvest the proceeds into lower-risk asset classes. However, if your investments are held in a taxable investment account, this could result in a capital gains tax (CGT) liability. When you sell investments that have risen in value, only the first £6,000 of gains are tax free (2023/24 tax year). Gains above this amount are taxed at up to 20%. This is another reason why it’s important to take a long- term view when managing your portfolio. By selling down investments gradually, as opposed to all at once, you can make the most of your CGT exemption each year.

Another option is to invest new regular savings or lump sums into lower-risk asset classes. This approach can help to avoid or defer tax liabilities. Depending on the size of your portfolio, the new savings might need to be quite substantial in order to have an impact on your portfolio’s overall risk level.

Planning ahead and making the most of your £20,000 ISA allowance each year could help you fund your goal more tax efficiently. There is no tax to pay on income and gains within an ISA, and you can also withdraw your money tax free.

Next steps

Managing an investment portfolio that suits your needs and goals isn’t easy. At RBC Brewin Dolphin, we can advise on the right solution for you, taking into account your individual circumstances, attitude to risk, and ambitions for the future.

By entrusting us with your investments, you can focus on enjoying life and look forward to the future with confidence.

For more information or support, please contact the RBC Brewin Dolphin team in Wales, here.

Disclaimer: The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Information is provided only as an example and is not a recommendation to pursue a particular strategy.

RBC Brewin Dolphin is a trading name of Brewin Dolphin Limited. Brewin Dolphin Limited is authorised and regulated by the
Financial Conduct Authority (Financial Services Register reference number 124444) and regulated in Jersey by the Financial Services Commission. Registered Office; 12 Smithfield Street, London, EC1A 9BD. Registered in England and Wales company number: 2135876. VAT number: GB 690 8994 69.