Building a Portfolio That Lasts: A Long-Term Investment Guide

Summary

Creating a portfolio for the long run is about more than just picking a few stocks or funds, it’s about crafting a strategy that aligns with your goals, risk tolerance, and time horizon.

Content

Creating a portfolio for the long run is about more than just picking a few stocks or funds, it’s about crafting a strategy that aligns with your goals, risk tolerance, and time horizon. Whether you're just starting out or refining your existing investments, here’s how to build a portfolio designed to stand the test of time. 

1. Know Your Risk Profile and Timeframe 

Before investing, it’s essential to understand your comfort level with risk and how long you plan to invest. Are you looking for steady growth over decades, or do you need access to funds sooner? Your answers will help determine the right mix of defensive assets (like bonds and cash) and growth assets (like shares and property). 

2. Diversify to Manage Uncertainty 

Diversification is your best friend in long-term investing. By spreading your investments across different asset classes, sectors, and geographies, you reduce the impact of any single market downturn. This approach helps manage the risk of an uncertain future while aiming for consistent returns. 

3. Choose Between Active and Passive Investing 

There are two main approaches to investing: 

• Active investing involves selecting specific assets with the goal of outperforming the market. This requires research and ongoing management. 

• Passive investing tracks a market index, offering broad exposure with lower fees and less hands-on involvement. 

Both strategies can be effective, and many long-term investors use a combination of the two. 

4. Focus on Valuation, Not Just Price 

Markets can be irrational in the short term, but over time, assets tend to revert to their fair value. Prioritising valuation helps you avoid overpaying and positions your portfolio for stronger long-term performance. 

5. Monitor and Adjust Regularly 

Even long-term portfolios need occasional check-ins. Review your asset allocation annually to ensure it still matches your goals. Rebalance if necessary—selling overweighted assets and buying underweighted ones—to maintain your desired risk level. 

6. Minimise Fees and Taxes 

Fees and taxes can erode your returns over time. Choose investment vehicles that are cost-effective and tax-efficient. Managed accounts and professionally constructed portfolios often offer built-in strategies to help with this. 

Building a long-term portfolio is a journey, not a one-time event. By staying informed, being disciplined, and making thoughtful adjustments along the way, you can create a resilient investment strategy that supports your financial goals for years to come. If you're unsure where to start or want to review your current portfolio, consider speaking with your financial adviser who can help tailor a plan to your needs.