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Consider realising investments for maximum profit
As the FTSE 100 ended 2010 up 9 percent for the year and 68 percent up from the trough of March 2009, investors who have held their nerve through the economic turmoil will now be in a position to take profits.
While profit taking strategies will vary depending on the type of investment, it is an approach that is rarely regretted. This is particularly true for investors with riskier investments who wish to maximise their returns before the assets start to depreciate in value.
It is important to manage the risk of the portfolio to minimise over-exposure to a particular asset class or region, particularly if it's most fruitful days are now behind it. Such vigilance not only maximises the returns available, but also releases capital which can be invested in new areas that may be more profitable going forward.
Taking profits can also provide opportunities for improving the tax-efficiency of investments, for example by making use of the annual Capital Gains Tax allowance and reinvesting in tax shelters, such as ISAs or pensions. This is particularly relevant in the months leading up to the tax year end.
