I recently wrote an article on my approach to investing. I went through the evolution of my strategy from my first baby steps into investing, to one that suits my circumstances and designed to achieve my financial goals.

I understood that I needed to invest but when I made my first investments, I had no idea how to pick the right ones for me.

I started investing when I was working at a fund manager. My strategy was just picking the investments that I was most familiar with. I wanted to get into the market as soon as I understood how important it was to achieve my goals and I knew the value in getting started as early as possible.

I don’t think I am alone in this. We saw this with the influx of new investors in 2020 and 2021. This was partially the result of having extra money during the closed COVID economy and a desire to capitalise on the stellar returns the market was spitting out at that time.

These investors rode the wave of Covid market returns and gained premature confidence in their investment selection capabilities. It was a momentum fuelled rally and buying shares which had done well paid off. A large cohort of these entrants I would classify as speculators making tactical allocations based on recent performance.

Since then, there has been volatility, but markets continue to climb and reach new highs. A contraction, and therefore a reality check, is inevitable. We’ve historically had a bear market every 3.5 years – it is folly to think that we will continue to avoid one going forward.

Studies have shown time and time again that volatility shakes investors and leads to poor decision making. This is especially true if investors are holding securities that they only chose for quick wins. Conviction is only skin deep when you buy an investment because you think it will only go up. That conviction evaporates quickly during a downturn.

What we are left with is a cohort of investors that hold investments that are mismatched with their goals.

So – what are your options when you’re transitioning from a speculator’s portfolio to an investor’s portfolio? What do you do when it is time to graduate to a ‘grown-up’ portfolio?
There are a few choices. Each come with their own flow on effects and consequences.

First steps

You may recognise that your holdings are no longer right for you. This is only the first step. To make changes you need to understand what is right.

You can do this by establishing a foundation. Ensure that you have an emergency fund and a clear budget that has a sustainable surplus that you are able to invest.

Then, go through the portfolio construction process. This involves:

• Defining your financial goals
• Knowing the required rate of return for your portfolio to reach those goals
• Understanding the asset allocation that will achieve that required rate of return
• Selecting the right investments that will fill those asset class buckets

We have further resources on the portfolio construction process here.

One you have a clear plan of where you need to be, it will be easier to understand which of the below avenues will help you to transition to your ‘grown-up’ portfolio in the most thoughtful way.


New portfolio decision tree


The most obvious option is to sell your investments. It is the result of 75% of above options, whether it is selling now or later.

Before you decide to sell, you need to know whether you have made a capital loss or gain. Markets have been on an extraordinary run. It is very likely if you have invested in the last 10 years that you have made a capital gain.

You can call a spade a spade and sell out of the investment and enjoy the gain that you have made. Contribute it towards your new strategy. This is the simplest way to proceed. It is important to note that there will be tax owed on any gain that you have made. You will receive a 50% capital gains discount if you have held the investment for more than 12 months.

If you have made a capital loss, you can sell the investment and offset losses against any capital gains that are made in the same Financial Year.

This is all high level – the inputs that go into the decision that you make include many variables – including:

• the time that you have held the investment – if you have held it for less than 12 months, it may be worth holding onto it until you cross the capital gains discount
• Have you made other capital gains in the same financial year? If not, it may be worth holding onto it if you have made a capital loss
• The future of the investment – do you have a strong belief in whether the company or security will succeed or fail in the future?


Your other option is to keep the holdings, with the realisation that as you progress through your investing journey and make contributions in investments that are more aligned to your goals that those ‘misaligned’ holdings will make up a smaller percentage of your portfolio with each contribution into other assets.

Eventually they may become ‘blips’ in your portfolio. The other way that you could keep them in your portfolio is on a conditional basis. It could be written into your Investment Policy Statement (IPS) that you will sell the investments based on set criteria. For example, in a year where your collective investments make a large capital gain (if it is at a capital loss), or at a certain price target.

Know your investments

Ultimately, the decision that you make will depend on how you feel about the investment. As you develop an intimate understanding of why you are holding your new investments that align with your goals, understand why these investments do not deserve a place in your portfolio. If you do not believe in the thesis of the investment anymore and have no faith in its ability to perform in the future, it may be worth cutting your losses or gains. I sold some of my investments that fit this bill when it came for me to transition to my current.

If it is still a decent investment but does not align with your goals, it could be worth considering keeping it until an opportune moment to dispose of it, or until it makes up a negligible part of your portfolio. For example, if you invested in Nvidia NVDA during its meteoric rise, but realise that you are an income investor that is looking for dividend stocks you may still believe in Nvidia’s future prospects even though there is a negligible dividend. The more you contribute towards your new income-seeking strategy, the smaller of a percentage Nvidia will make in your portfolio. I’ve also got some ‘blips’ that are small percentages of my total portfolio – remnants of my old portfolio. I don’t think they are bad investments – they just don’t match what I am trying to achieve.

Investing is not rocket science and it is not a perfect art. We all make mistakes along the way, especially as we evolve and grow as investors. There is no one right decision. Treat disposing of assets with the same careful consideration of purchasing new assets. Understand the investment and why it is not right for you, the consequences of disposing of it from a tax perspective and make an informed decision.