Scott Haslem LGT Wealth Management CIO shares his three simple rules to keep your portfolio out of trouble. Written for and published in The Australian.
The wealthiest investors often have access to sophisticated and frequently exclusive opportunities, including private equity. They see new deals first, often in early stage tech, and can participate in strategies out of reach for most.
But access alone doesn’t define long-term success.
Having spent much of my career engaging institutional investors, most recently as a chief investment officer, many of the basics that impact how well our portfolios perform are surprisingly simple, practical and well within reach for most investors.
All investors make mistakes – myself included. I own a couple of stocks my head of equities told me a month or so ago to sell, including one in the Aussie healthcare sector. I don’t do everything he suggests but when he flags a local market darling that’s lost the reason I bought it, it’s worth paying attention.
Experience has shown me that when a portfolio is built on a few non-negotiable principles, mistakes become flesh wounds rather than catastrophes.
Here are three simple, practical lessons to help keep your portfolio out of trouble.
Diversification isn’t “BS” – it’s boring survival. And who doesn’t want their savings to survive? Almost no investor can afford to ignore it.
Owning a mix of investments doesn’t mean settling for low returns. It means accepting that no single idea, company or sector wins all the time. You can still chase growth but diversification improves your odds of success.
The same logic applies if you’re chasing steady income. Drawing income from multiple sources means one disappointment won’t derail your cashflow.
Start by understanding your risk tolerance. Did you panic-sell during Covid? Then spread your investments across a few different asset classes, geographies and sectors. This mix helps capture returns from what’s working and cushions the damage from what’s not.
Yes, the ultra-wealthy can access niche opportunities like venture capital, litigation finance or music royalties – assets that move independently of traditional markets. They also have sophisticated tools to measure risk. But most investors can achieve meaningful diversification through simpler means.
Pair your Australian equities, and most likely property, with global equities to access sectors under-represented at home, such as biotech, AI, cloud computing and robotics. And with interest rates no longer at zero, portfolios should include fixed income – bonds that pay you for lending to governments or quality corporates across sectors.
It makes the investing journey smoother, steadier and far more rewarding than just watching your CSL and Commonwealth Bank shares limp lower.
Don’t design a portfolio that demands more time than you can realistically give it. Life gets busy – work, family, sport – and discipline fades.
Ask how complex your portfolio really needs to be. Do you need to own every stock directly, or does a manager paid to monitor markets full-time make more sense?
In my own portfolio, about 75 per cent of my equities sit with professional managers. The rest are direct holdings. These are companies I follow because they interest me. I know I manage them less rigorously than a fund manager would, but because they’re the right size within my portfolio, any mistakes aren’t fatal.
If you struggle to stay on top of reviews or rebalances, outsource the discipline. You might consider relying entirely on managers and possibly a financial adviser. This ensures someone is watching your portfolio when trends shift, even while you’re on holidays.
You can also deepen diversification by blending managers with different investment styles such as value, growth, quality and so on. When one style is out of favour, another may perform.
Knowing your limits isn’t an admission of defeat. It’s a recognition of where your time and temperament are best spent and ensuring your money keeps working even when you’re not.
We live in the most investor-friendly era in history. The internet and now AI let us read fund reports, compare returns and analyse fees in minutes. Yet fees remain one of the most neglected parts of investing.
One key lesson is that there’s a right manager fee and a wrong one.
Investors and managers share the same goal. We’re after returns, but the cost of that chase has to be fair.
The “right” fee depends on the investment. Sophisticated investors in private equity funds targeting high double-digit returns might reasonably pay more. But active equity managers trying to beat the market by a per cent or two should charge less. For bond funds, where “alpha” is usually limited, the fee should be lower again.
Overpaying is a self-inflicted investment crime. Paying premium fees for low-alpha strategies is like lighting a stack of cash that could have been quietly compounding in an index fund instead.
Compounding is one of investing’s true superpowers. Consistently adding to your portfolio can outweigh even strong year-to-year performance. But compounding only works if fees aren’t eating away your gains.
Take the time to check what you’re paying and ask whether it’s fair. Maybe phone a friend or ask your favourite AI tool, like ChatGPT, what a reasonable fee looks like for a product you’re considering. You might be surprised at the answer. Then do the same across the rest of your portfolio.
It’s a simple exercise that can have a profound impact on your long-term results.
The best investors I’ve met don’t chase the next big thing. They master the basics and stick with them. Good investing has always been about discipline, not prediction. Do that, and you’ll stay calm, stay invested, and stay in the game even as the world keeps shifting around you.
When markets turn volatile or everything feels expensive, keep some liquidity in reserve. Don’t get caught up in doomsday hysteria. It’s moments like these, including sudden shocks such as April’s Liberation Day, that often prove to be the most rewarding times to lean in while others lean out.
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