In our last blog, Why Multi-Asset Investing Is the Bedrock of Financial Security, we explored why spreading investments across different asset classes can help create a more resilient portfolio.
We finished with a simple point: multi-asset investing may make investing seem a little less exciting. But often, that is exactly the point.
Your investments are there to support your wider financial plan and the life you want to live. They do not need to provide a constant source of excitement.
This month, we want to take that idea a little further and look at investment risk, diversification, and why a properly balanced portfolio can matter far more than finding the next winning investment.
A balanced portfolio brings together different types of investments so you are not relying on a single asset, market, or investment style to deliver your financial goals.
The danger of the hot tip
Most of us have probably experienced it.
A friend mentions a company whose shares are apparently about to take off. Someone at work talks about an investment that has already doubled. A story appears online about the next big opportunity.
And somewhere in the back of our minds comes the thought:
“Perhaps I should have a little punt.”
The attraction is understandable. Nobody wants to feel they have missed out.
It reminded us of Jeffrey Archer’s Not a Penny More, Not a Penny Less.
Spoiler alert: the story centres on a group drawn into an investment that appears to offer significant potential. They invest heavily, only to discover that the shares are effectively worthless. Without giving too much of the story away, what follows is their attempt to recover exactly what they lost, not a penny more, not a penny less.
It is fiction, but the underlying lesson is very real.
Investment history is full of periods when an idea captured people’s imagination. From tulip mania in the 1600s through to the dotcom boom in the late 1990s and, more recently, countless supposedly unmissable investment opportunities, the message is often remarkably similar:
This time is different. Everyone is making money. Don’t miss out.
Here is the problem.
We tend to hear much more from the people whose gamble paid off than from those whose gamble failed.
Success makes a better story.
Before following an investment tip, ask two questions
If somebody mentions an investment opportunity, two simple questions can be useful:
- Do I genuinely understand what I am investing in?
- If it goes wrong, how much can I afford to lose?
Any investment tip should be treated with caution unless you understand what lies behind it.
A tip is not research.
And excitement is not an investment strategy.
Sometimes boring is good
In our previous blog, we argued that investing can sometimes benefit from being a little boring.
The Forth Bridge provides a good illustration.
For decades, painting and maintaining the bridge were effectively continuous tasks. Its enormous size and exposure to the harsh Scottish environment meant maintenance was never really finished.
Painters could reach only one end, only to find work needed elsewhere.
It probably did not feel particularly exciting.
But there was a purpose behind it.
The objective was not to make today’s bridge section more exciting than yesterday’s. It was to maintain the structure so that it could continue doing its job.
We think investing should be viewed in much the same way.
A portfolio is not there to win this week’s competition. It is there to help finance your future.
That requires patience, maintenance and discipline.
What does a balanced portfolio actually mean?
This is where diversification can sometimes be misunderstood.
Owning several investments does not automatically mean you are diversified.
Imagine, for example, that you hold five multi-asset funds. At first glance, that might sound well diversified.
But if all five invest in broadly the same assets, follow similar investment styles and react in much the same way to changing markets, you may simply have five versions of the same thing.
The same can happen with tracker funds.
You might hold a global tracker alongside a US tracker and assume you have increased diversification. However, a global equity index is likely already to have significant exposure to US companies.
Adding another US tracker may therefore increase your exposure to something you already own rather than meaningfully broadening the portfolio.
More funds do not necessarily mean more diversification.
True diversification is about understanding what sits underneath them.
Different investments have different jobs
For us, balance means bringing together investments that behave differently.
That could mean combining different:
- asset classes
- geographical regions
- investment styles
- sectors
- fund managers
- approaches to managing risk.
The important part is not simply having a long list of investments.
It is understanding why each part is there.
Some investments may capture more of the upside when markets are rising strongly but fall further when conditions deteriorate.
Others may lag when markets are racing ahead, but provide greater resilience when conditions become difficult.
Some investments may provide income. Others may be held primarily for long-term growth.
A balanced portfolio accepts that not everything will be performing strongly at the same time.
In fact, if every part of a supposedly diversified portfolio always behaves in exactly the same way, it is worth asking how diversified it really is.
The aim is not to build a portfolio that wins every year.
It is to create a blend capable of working together across a range of different market environments.
Balance should start with you
There is another important part of this discussion.
There is no universally perfect, balanced portfolio.
The right balance depends on the individual.
Someone investing for several decades may be comfortable accepting greater short-term fluctuations in pursuit of longer-term growth.
Someone approaching retirement and planning to start taking money from their investments may need to think differently.
Your financial circumstances, objectives, timescale, capacity for loss and feelings about investment risk all matter.
That is why we believe investment selection should follow the financial plan rather than the other way around.
The question should not simply be:
“Which investments should I buy?”
It should start with:
“What am I trying to achieve?”
Investment research matters — but so does financial planning
At Lampiers, we outsource much of our specialist investment research, while remaining actively involved through our investment committee process.
We believe good investment research matters.
The investments need to be suitable for their purpose and capable of supporting the financial plan.
But we also believe the real value of financial planning goes far beyond selecting investments.
Investment returns are important, but so are the decisions made around them.
For example:
- Are your investments held in the most appropriate tax wrappers?
- Are pension contributions being used effectively?
- How should income be structured in retirement?
- How much investment risk do you actually need to take?
- What happens if markets fall?
- How should the plan adapt when your circumstances change?
- And can you remain comfortable enough with the strategy to stick with it?
Research from Vanguard into the value of financial advice has highlighted that value can come from areas such as financial planning, behavioural coaching, tax-efficient decision-making and helping clients remain disciplined, rather than simply trying to outperform markets.
That is an important distinction.
The investments matter, but they are there to serve the financial plan — not become the financial plan.
You do not have to win every year
A balanced portfolio is not designed to find this year’s winner.
Nor should it be built by looking backwards, identifying what performed best recently and assuming the same thing will happen again.
It is about accepting something fundamentally uncertain:
We do not know what will happen next.
Rather than trying to second-guess markets, a balanced portfolio aims to avoid relying too heavily on any single prediction.
The balance will differ for different people, but the principle remains the same: combine different investments and strategies so you are not relying too heavily on any one company, market, asset class, or view of the future.
There will still be periods when investments fall. Diversification cannot remove investment risk altogether.
But a thoughtfully constructed portfolio can provide a framework for navigating those periods without needing to chase every opportunity or react to every market movement.
And that leads neatly to the final blog in this three-part series.
Because building the portfolio is only part of the challenge.
Staying invested when the headlines are telling you to worry can be considerably harder.
Next month, we will explore How to Stay Invested Without Stressing About Market Headlines.
If you would like to start your financial planning journey with Lampiers, we would love to start that conversation.
Risk Warning
This article is provided for informational and educational purposes only and does not constitute financial or investment advice. It should not be interpreted as a recommendation to buy or sell any specific investment or to adopt any particular strategy. While every effort has been made to ensure the information is accurate and sourced from reliable materials, Lampiers Financial Planning cannot guarantee its completeness or accuracy. Opinions expressed are those of the author and may not reflect the views of Lampiers. You should always seek personalised advice before making financial decisions. The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.
A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The Financial Conduct Authority does not regulate cash flow planning.
Please note that this article was written in August 2026, based on the prevailing legislation and taxation applicable at that time.
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