Build a robust portfolio for all seasons

Now that an investor has a focus on how to invest, the next step in the investment process is to decide what to invest in. The choice is vast, but the solution – provided you have an astute adviser at the helm – can be reduced down to an elegantly simple set of risk choices. The returns that these risks should deliver are captured using institutional quality, low cost funds that seek to deliver the return of each market risk as effectively as possible (rather than trying to beat the market, which is a futile pursuit according to the evidence).

The first and primary decision to make is to decide how much to invest in growth assets, such as stocks, and how much to invest in defensive assets, such as high-quality bonds that should offer protection from large stock market falls. The overall mix of investments is known in the industry jargon as ‘asset allocation’. Your adviser will help by determining the appropriate asset allocation based on a deep understanding of your situation.

A good adviser will have a disciplined screening programme that will ensure that each type of investment (asset class) is worthy of its place in the portfolio. Our Investment Committee holds this responsibility, and adopts a framework through which it argues reasons for and against a wide range of asset classes’ inclusion in investment portfolios.

Details of the Investment Committee’s asset class review criteria are provided below.

Be clear where the returns are meant to come from. This comes through a proper understanding of underlying risks.

Check there is enough good, reliable data to understand how an asset class behaves.

Make sure the expected return is worth the extra risk taken on compared with other options. Extra risk should only be taken on if there is an expectation that one will be compensated for it.

Look at what the asset class does to the whole portfolio. Some may be expected to provide protection during poorer markets (e.g. high-quality bonds). Others may be included as core return drivers (e.g. global stock markets). Regardless, an asset class’ role should be clear and defined. Remember that to add something into a portfolio, something must be taken out.

Make sure there’s a simple, low-cost, liquid way to invest in the asset class. It becomes more difficult to argue the case for inclusion if the only available products are expensive, hard to access or excessively complex.

Think about how hard it is to manage properly over time (monitoring, controls, expertise needed).

As the late David Swensen stated:

By understanding and articulating the role played by each asset class, investors avoid making allocations based on the fashion of the day.

The thing to remember is that in investing there is no single perfect solution to building a portfolio. Success lies in a sensible structure with the long-term attributes of each portfolio building block contributing positively to the overall portfolio, and the recognition that in the short-term, some elements of the portfolio will do well and other elements less so. This is expected and by design.

This is a purely educational document to discuss some general investment related issues. It does not in any way constitute investment advice or arranging investments. It is for information purposes only; any information contained within them is the opinion of the authors, which can change without notice. Past financial performance is no guarantee of future results.

Where specific products are referred to in this document, it is solely to provide educational insight into the topic being discussed. Any analysis undertaken does not represent due diligence on or recommendation of any product under any circumstances and should not be construed as such.

Approved by Best Practice IFA Group Limited on 21 April 2026