5 tips for building an all-weather portfolio
Read the headlines right now, and it can be tempting to wonder where the world is heading. Of course, no one knows the answer to that. But it's human nature that we can feel the urge to 'do something' when geopolitical tensions flare, or economies are uncertain, or markets are moving fast.
Successful investing, however, often means doing the opposite - staying the course.
Continually changing tack can throw the best-laid investment plans off course.
The fact is, there is always a crisis of some sort going on in the world. There always has been.
The trick is not to let events you have no control over drive short-term investment decisions.
An easier, less stressful - and often cheaper - solution is to grow an 'all-weather' portfolio.
Building an all-weather portfolio isn't about beating the market or avoiding every downturn. It's about giving yourself the best chance of achieving your long-term goals regardless of what the markets do in the short run.
Five strategies can help you grow an all-weather portfolio. The beauty of these steps is that they are remarkably simple to follow.
Here's what's involved.
1. Invest regularly
Successful investing isn't complicated - but it is consistent.
Investing regularly is a smart move on so many levels. To begin with, it helps us form the habit of investing, and small habits can be rewarded with big gains over time.
Investing regularly is also a lot easier on your budget, and you get the benefit of compounding returns from the moment every dollar is invested.
It's also very simple. Just set up an automatic transfer from your everyday account into the investment of your choice, and you've got wealth creation on autopilot without the stress of wondering if your market timing is 'right'.
2. Diversify
I realise 'diversification' is my mantra. But spreading your portfolio across a variety of different investments is one of the most effective ways to reduce risk and enjoy a smoother ride.
True diversification means bringing a blend of asset classes, industries, and geographies to your portfolio.
Not so long ago, achieving this level of diversification called for a solid chunk of capital. Not anymore.
Exchange-traded funds (ETFs) have been a game-changer when it comes to diversification. Even younger Australians with limited cash can build a diversified portfolio through a basket of ETFs.
3. Rebalance regularly
No diversified portfolio stays the same forever.
Over time, some investments will grow faster than others. That's great for returns, but it can throw your original asset allocation out of whack.
For example, if global sharemarkets surge while fixed interest investments such as bonds stay flat, you could find your portfolio has a far greater weighting to higher risk assets than you're comfortable with.
In practical terms, rebalancing means selling down some investments, buying more of others, or a combination of both.
If you choose to sell, yes, you could face a capital gains tax cost. But without rebalancing, you may run the risk of having significant exposure to a fall in a given investment market.
How often should you rebalance? Assuming no major life changes, I'd say it's worth reviewing your portfolio at least annually to see if the asset weightings are still in line with your goals and risk tolerance.
4. Keep an eye on costs
Strong returns are a hope. Investment fees are a certainty. And high fees can be more of a drain on a long-term portfolio than many people realise.
High fees mean less of your money is invested. That means lower compounding (after-fee) returns - not just in the year you pay those fees, but every year thereafter.
Long story short, even a small saving in fees can lead to a significant improvement in the value of your portfolio over the long term.
Low fees are another area where ETFs have revolutionised investing. Passively managed, index ETFs can charge fees of just 0.03% per year.
5. Look to the long term
Your portfolio is more than a collection of investments. It is a tool to help you achieve personal goals over the long term.
Unless your goals or life circumstances change, chances are there is no need to alter your approach to investing.
Let's be clear though. The 'long term' is not the next six months or even the next year.
When it comes to investing, long term means around five to seven years or more.
It's a timeframe that can be hard to get our heads around, especially as so much of the future is uncertain.
That's part of the appeal of an all-weather portfolio. It works on the assumption that you don't know what's coming next - and you don't need to.
An all-weather portfolio is designed to handle inflation, recession, growth, and geopolitical shocks. That's because this type of portfolio is based on solid principles - diversification, low fees, regular investing, thoughtful rebalancing and long-term thinking.
If you can tick these boxes, you don't have to worry about the shifting sands of short-term events. And that can be incredibly liberating, as well as financially rewarding.
Ready to start investing? InvestSMART has a range of diversified portfolios that all come with a capped management fee. If you'd like help selecting the right style of portfolio for you check out our free statement of advice quiz. It will show you which InvestSMART ETF portfolio may best suit your goals and investment timeframe.
Frequently Asked Questions about this Article…
An all-weather portfolio is a diversified investment mix designed to give you the best chance of reaching long-term goals regardless of short-term market moves. It’s not about beating the market or avoiding every downturn, but about using steady principles—diversification, low fees, regular investing, rebalancing and long-term thinking—to handle inflation, recessions, growth periods and geopolitical shocks.
Investing regularly helps you build the habit of saving, makes contributions easier on your budget and gets your money working sooner so compounding can start. The article recommends simple steps like setting up automatic transfers from your everyday account into your chosen investment to take timing stress out of the equation.
Diversification spreads your money across different asset classes, industries and geographies to smooth returns and reduce risk from any one market. Exchange-traded funds (ETFs) make this much easier and cheaper—allowing investors, including younger Australians with limited cash, to gain broad exposure through a single product.
Because some investments grow faster than others, your original asset allocation can drift over time. The article suggests reviewing your portfolio at least annually (unless you have major life changes) and rebalancing by selling some holdings, buying others, or both. Keep in mind selling can trigger capital gains tax, but rebalancing helps avoid unintended overexposure to higher-risk assets.
Investment fees are a certainty and can significantly reduce your long-term, after-fee returns because they lower the amount compounding each year. Keeping costs low—by choosing low-fee products like passively managed index ETFs, which the article notes can charge around 0.03% per year—can meaningfully improve portfolio value over time.
In the article, 'long term' refers to a timeframe of around five to seven years or more. Thinking in these terms helps you avoid making short-term changes driven by headlines or market volatility, and allows an all-weather portfolio’s diversification and compounding benefits to work.
An all-weather portfolio isn’t a guarantee against losses, but it’s designed to give you a better chance of achieving long-term goals despite geopolitical shocks, market swings or economic uncertainty. The approach focuses on principles—diversification, regular investing, low fees, rebalancing and long-term thinking—rather than trying to predict or react to every event.
InvestSMART offers a range of diversified portfolios that come with a capped management fee. If you’d like help choosing a portfolio style, the article points to a free statement of advice quiz that can show which InvestSMART ETF portfolio may best suit your goals and investment timeframe.
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