What happens when I update my investor profile?

Updated by Daniel Trum

Whenever you update your profile, Selma will check whether your long-term investment strategy should be adjusted, too. It is very important to keep Selma informed about your personal situation, so that your strategy always matches your needs and expectations. This is the only task left to you, while Selma takes care of your investments 🙌.

Why is it so important?
The portfolio has to suit you and your life situation. Selma automatically makes sure that your investment strategy fits your life, regardless of buying a house, receiving an inheritance, or simply getting older.

How and when should I update my profile?

Log in to your account at www.selma.com, go to your investor profile, click on “update investor profile”, and update the numbers and answers to questions. Generally, Selma recommends you to update your profile whenever one of the following things have changed materially from the answers you provided:

  • The amount of cash at your disposal
  • Cash buffer you’d like to keep
  • Planned expenses
  • Real estate ownership
  • Debt
  • Illiquid wealth (cars, boat, art, etc.)
  • Monthly savings
  • Other investments outside Selma (amount, riskiness)
  • Investment horizon (how many years?)
  • Feelings about taking risks

What happens after I update my profile?

The Selma algorithm re-calculates the optimal portfolio for you. You can read more about how Selma puts your investments together here. An optimal investment strategy gives you the right amount of risk and return potential with what you feel comfortable, and it avoids too concentrated risks (e.g. owning a house AND investing into real estate). 

Right after updating your investor profile, you can see your new optimal investment strategy and confirm it, if you want. Your portfolio will then be automatically adjusted over the next few trading days 🤖. You don’t have to do anything else. If your pillar 3a portfolio (it works a bit differently than your standard Selma portfolio) also needs an adjustment, Selma will get in touch with you to confirm a strategy switch.

What exactly happens in my portfolio?

Normally, these adjustments will involve just changes of the weights of ETFs in your portfolio. The more risk you are willing or able to take, the more your mix of ETFs will be tilted towards growth-oriented funds, and less towards stable funds like loans to countries. No funds will be removed or added to your portfolio. Exceptions to this are the following cases:

  • Your willingness to take risks increases to, or falls from, an extremely high level. At the maximum risk willingness level, loans (also known as “bonds”) will be fully excluded from your portfolio. 
  • You tell Selma that you own real estate 🏡 now (or you don’t own it anymore)
  • You decide to switch from a standard strategy to a sustainable one 🌱, or vice versa

In these cases, complete funds (or even the whole list of funds in your portfolio, in the case of a switch to or from sustainable investing) have to be removed, replaced or added.

Does this cost me something?

The changes in your portfolio may require some buying and selling of funds, which can create some costs. Usually, this will be in the same range like the regular rebalancing adjustments that every portfolio goes through now and then. 

Such costs come from trading spreads (difference between the prices you get for buying and selling the same fund in the market) and stamp duty taxes. Selma and the fund providers don’t take any additional charges.

Generally, it is safe to say that, if your portfolio needs significant changes because your life situation changes, then making these changes is worth the costs. The risks you may encounter without these changes are likely worse than the minor costs the trading incurs.

To give you an extreme example: If you decide to switch to or from sustainable investing, the complete switch for all funds in your portfolio will likely cost you less than 0.6% of your total invested amount (see here for a calculation). This would still be less than one annual fee from Selma.

What happens if I don’t update my profile?

You will still benefit from the wizardry of the Selma algorithm 🤖, like constantly monitoring your age and your cash deposits, adjusting your portfolio gradually and incrementally whenever necessary.

However, if your actual life situation deviates a lot from what you’ve told Selma, your portfolio may not be the ideal investment mix for you anymore. The returns and/or risks may not be in line with your needs and expectations anymore.

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