If you’ve been investing for a while, there’s a question that probably crosses your mind every few months: am I doing this right?
Sometimes the question is prompted by a market wobble, sometimes by a colleague’s confident-sounding stock tip, sometimes by a financial podcast you didn’t mean to start listening to. Whatever the trigger, the urge is the same. You look at your portfolio, frown a bit, and start wondering whether you should be doing something different.
The honest answer to “is this working?” is almost never available at the timescale you’re asking it on.
A year is too short. Three years is too short. Five years is borderline. The minimum honest test of an investing strategy is roughly ten years. And even then, the question you should be asking isn’t “how is the portfolio doing?” It’s “is the strategy still the right one?”
Those are very different questions, and conflating them is how good portfolios get wrecked.
Why short timescales lie to you
Equity markets are noisy in the short run and orderly in the long run. The standard caveat — past performance is no guarantee of future returns — is true, but the long-run history of broad equity markets is also remarkably consistent. Global equities, in real terms, have produced roughly 5–7% per year on average over decades.
Within any single year, though, returns can be anywhere from -40% to +40%. Within five years, they can still be negative. Anyone who started investing in early 2000 was underwater for nearly a decade. Anyone who started in early 2009 looked like a genius within 18 months. Neither outcome had much to do with the quality of their strategy.
Looking at one year of returns and concluding something about your approach is like tasting a single spoonful from a 30-litre stew and deciding whether the recipe works. The sample is too small. The signal is drowned in noise.
What “working” actually means
Before we can tell whether a strategy is working, we need to be honest about what working means. Most people, asked this in passing, will say something like “making money.” That’s true but not very useful. A more honest definition has three parts:
1. The strategy still matches your goals. If you started investing for retirement at 30 and you’re now 50, the time horizon has shortened — and that may genuinely warrant a different approach (more bonds, less equity).
2. You’re behaving the way the strategy assumes you’d behave. A long-term, buy-and-hold approach only works if you actually buy and hold. If you’ve panic-sold twice in five years, the strategy isn’t broken — your application of it is.
3. The returns are roughly in line with the asset classes you’re invested in. Not “have I beaten the market?” but “am I getting what a global equity portfolio is supposed to deliver, minus my costs?”
Notice what’s not on this list. “Am I beating my mate Dave who’s into individual tech stocks?” is not a useful test. “Did I have a good year?” is not a useful test. “Did I have a bad year?” is also not a useful test.
The 10-year test in practice
Once a year — say, the same week each year, when you do your tax return or refresh your budget — sit down with your portfolio and ask the following questions in order. The whole exercise should take less than an hour.
1. Has my time horizon changed?
How many years until you’ll start spending this money? If that number has dropped substantially since last year (you’ve decided to retire earlier, you’re three years out from a house purchase, your circumstances have shifted), the asset allocation might need adjusting. Money you’ll need within five years probably shouldn’t be in volatile assets.
If your time horizon is still 15+ years, almost nothing else needs to change.
2. Am I still contributing?
Open the actual numbers. How much went in this year? Was it more than last year, or less? If contributions have drifted downwards, that’s almost always more important than what the market did. Compounding doesn’t care about your portfolio’s IRR; it cares about whether new money keeps showing up.
If contributions have stalled, the right response is to adjust the standing order, not the strategy.
3. Are my costs still reasonable?
What are you paying, all-in, as a percentage of the portfolio? Platform fee plus fund OCF plus any trading costs. If that number has crept above ~0.5% — or if your portfolio has grown into the territory where a different platform would now be much cheaper — it might be time to look at switching.
4. Is my asset allocation still close to the target?
If you set a target of, say, 80% equities and 20% bonds, where are you now? Markets drift the percentages over time. If you’re now at 90/10 because equities have run hard, you may want to rebalance back. This is an unglamorous but important annual job.
For investors with simple all-in-one funds (a multi-asset fund, a target-date fund, or a single global tracker), this question is largely automatic — the fund handles it.
5. Am I still emotionally on board?
This is the question most people skip, and it matters more than the technical ones. Did the last year of headlines make you want to sell? Did you check the portfolio more often than you’d like to admit? Did a bad month make you start googling alternative strategies?
If yes, the issue isn’t usually the strategy. It’s usually that you’re holding more risk than your nerve can comfortably carry. The fix is to dial down the equity portion slightly, not to abandon long-term investing.
A strategy you can’t sleep with is not a strategy that will make it to year ten.
The questions you should not be asking
Equally important: what to ignore.
“Did I beat the market this year?” You shouldn’t be trying to. If you’re using a global tracker, you are the market — you’ll get its return minus a small cost. That’s the goal.
“Should I move to cash because [recent event]?” No. Market timing has been studied extensively and the verdict is consistent: missing even a handful of the best market days dramatically reduces long-term returns, and the best days cluster suspiciously close to the worst days. Staying invested is almost always the right move, even when it feels uncomfortable.
“What does my friend’s portfolio look like?” Their goals, time horizon, tax situation, income, and risk tolerance are not yours. Their portfolio’s performance tells you nothing useful about whether yours is working.
“Should I add this hot new asset class everyone’s talking about?” Probably not. The fact that you’ve heard about it usually means you’re late, and a portfolio that follows headlines is one that takes on costs and risks for very thin compensating returns.
What to do when the test reveals a real problem
Sometimes the annual review will surface something genuine. Maybe you’ve been paying 1.5% in fees because you never updated your platform. Maybe you’ve drifted into a 95% equity portfolio at age 60. Maybe you’ve been investing in three actively managed funds that have all underperformed their benchmarks for a decade.
When you find a real issue, the rule is: change the smallest thing that fixes the problem.
If the issue is fees, switch platforms. Don’t also rebuild your asset allocation and add three new funds.
If the issue is asset allocation drift, rebalance. Don’t also change your contribution amount and switch to a new strategy.
If the issue is that you’ve been picking individual stocks and consistently underperforming, move to trackers. Don’t also start day trading the rest.
The temptation, once you’ve found one thing wrong, is to overhaul everything. Resist it. Each unnecessary change is another opportunity to introduce a new mistake, and every change has a cost (transaction fees, tax events outside ISAs, time out of the market). Keep the surgery minimal.
The boring truth about long-term investing
If you do the annual review honestly for ten years, you’ll notice something. Most years, the answer to “should I change anything?” will be no. Maybe a small contribution increase. Maybe a rebalance. Occasionally a platform switch. Almost never a fundamental rethink.
That’s not a failure of attention — it’s the strategy working.
A long-term, low-cost, diversified portfolio is supposed to be boring. The whole point is that it does its job in the background while you get on with your life. The investors who do best aren’t the ones with the cleverest strategies; they’re the ones who picked a sensible strategy at the start, contributed regularly, and didn’t fiddle.
The 10-year test isn’t really about checking whether the portfolio is working. The portfolio mostly takes care of itself. It’s about checking whether you are still working with it — still contributing, still aligned, still able to leave it alone.
If yes, the answer is the same as last year: keep going. The boring approach is winning, even if it doesn’t feel like it.
This article is for information and education only and does not constitute financial advice. Investments can fall as well as rise in value and you may get back less than you invest. If you are unsure about the suitability of any investment, please seek independent financial advice.