How a portfolio divides its work among broad asset classes, such as cash, bonds, shares and listed property, locally and offshore, often explains more of its behaviour than how many funds it holds.
Each part brings different strengths and risks. Cash supports access and stability. Bonds can provide income and diversification but respond to interest rates and credit conditions. Shares seek long-term growth with greater short-term movement. Listed property brings property-related income and market risk.
The appropriate mix depends on the goal, time horizon, withdrawal needs and ability to live through losses. A high-growth allocation may be unsuitable for a fixed short deadline; an extremely cautious allocation may struggle against inflation over decades.
The labels on model portfolios do not replace looking at the actual percentages.
Try this now
Write down the current asset allocation for one portfolio and give each class one job. Then compare it with the target mix and with the date the money is needed.
Ask your advisor
- Which part of the allocation is expected to provide growth, income and near-term liquidity?
- What range of temporary decline was considered?
- Which assumption would make this mix no longer appropriate?
Asset allocation is a set of trade-offs. It should be tied to a purpose rather than copied from a generic risk label.
Next: Rebalancing keeps the plan, it does not check the plan