Building your portfolio

Once we feel like we have a good handle on your attitude to risk, we’ll recommend a diversified portfolio that aligns with that risk profile.

"

risk benchmarks

Steward Wealth uses four risk benchmarks that each reflect a different risk-return profile, simply referred to as A (the most conservative, that is, it has the lowest allocation to more volatile growth assets) to D (the least conservative).

Growth assets (neutral weightings)

Defensive assets (neutral weightings)

A

%

%

B

%

%

C

%

%

D

%

%

As you’d expect, as the weighting to growth assets increases across the benchmarks, so each benchmark behaves differently: benchmark A is less volatile than benchmark D, but it also has lower returns.

The chart below shows that in the GFC, the most conservative portfolios fell the least – no surprise there. But over the long run, it’s the more growth-oriented portfolios that deliver the highest return.

It may seem an obvious choice: pick the portfolio that goes up the most over time, but you have to be prepared for the added volatility that comes with it. Or maybe you want to prioritise generating income rather than growth, which means a different tilt to the portfolio.

The next chart looks at the average returns from 1990 to 2024 for a generic portfolio invested in line with the different benchmarks for rolling 1, 5, 10 and 20-year periods. The key take aways are:
 

  • The shorter the period, the greater the spread between highest and lowest returns

    •  

  • The longer the period, the less likely it is the portfolio will experience a negative return, even the highest growth ones
Multi asset portfolios over rolling timeframes

Source: Zenith and Steward Wealth

benchmarks can be flexible

It’s also important to remember that the indicated split between growth and defensive assets is what we refer to as a ‘neutral’ position, but markets are rarely in such a state, so the actual allocation will typically vary around that level, depending on our view of where markets are positioned and what offers the best value. Also, the indicated growth/defensive splits are not set in stone, they can easily flex up and down.

And as we said earlier, peoples’ risk appetites can change over time. So, if you ever feel like the agreed risk profile isn’t really a good match for you, it’s important that you let us know.

Still thinking about your risk profile?

Understanding your comfort with risk is key to building the right portfolio. Revisit the key factors or explore how we reduce market volatility.

Review Risk Profiling Guide
See How We Reduce Volatility

Ready to put your portfolio to work?

We’re here to make sure your strategy is the right fit for where you are now — and where you want to go.

Book a Chat With Your Adviser