How to build a resilient portfolio, and the one decision behind 90% of returns

As someone relatively new to investing, the past few years have felt increasingly difficult to make sense of. Inflation, wars, energy shocks, trade disruptions and rising geopolitical tensions have made investing feel daunting at times, particularly when market shocks seem less like exceptions and more like the new normal.

How do you actually build a portfolio that can withstand all of this?

Do you hold more cash? More gold? Reduce equity exposure? Is global diversification enough? Or do you just hold and ignore, hoping it'll balance out over time?

To find out, I reached out to two experienced wealth advisers – David Lane from Ord Minnett and Russell Lees from Kauri Wealth – as well as geopolitical strategist Merriden Varrall, Founder and CEO of Vantage Geopol and Special Adviser (Geopolitics) at KPMG South ASPAC.

Their responses suggested that investors may be asking the wrong questions. Rather than trying to predict the next crisis, the focus should be on building a portfolio resilient enough to withstand many of them.

As Varrall stated:

“The practical point for investors is that resilience is less about predicting the next event, and more about recognising when exposures sit on top of a baseline that is being permanently rewritten.”

Why uncertainty feels different now

For decades, investors could largely treat geopolitical events as temporary disruptions. Markets would wobble, headlines would dominate for a few weeks, and eventually attention would move on.

Varrall argues that assumption is becoming less reliable.

"What is different now is that shocks are arriving into a system that is already under sustained stress," she says. "That is why they are more frequent and harder to 'move past', even when any single event is not historically unprecedented."

Her argument is not that crises themselves are new, but that multiple forces are now colliding at once — what the WEF has termed a "polycrisis". From strategic competition between nations to technological disruption, climate pressures and political instability, these forces no longer occur in isolation but increasingly overlap and amplify one another.

Geopolitical risk is becoming less of an occasional interruption and more of an ongoing force shaping markets.

"Returns will be influenced not just by growth and earnings, but by how exposed an asset is to changing geopolitical settings," Varrall says.

The investment winners of the next decade may depend not just on fundamentals, but on how well-positioned businesses are for a more fragmented and unpredictable world.

The biggest investing mistake in uncertain times

If the world has become more unpredictable, the natural instinct is to get defensive. Both advisers warned that investors often hurt themselves most when uncertainty rises.

Lane says one of the biggest risks is paralysis. 

"Waiting for the 'right time' to invest can lead to sitting on the sidelines too long, and missing out on income and potential capital gains."

He also warns against becoming "too absolute" in portfolio decisions, whether that means selling everything, moving entirely to cash, or waiting endlessly for the perfect entry point.

Lees sees a similar pattern when investors try to hedge too aggressively. 

"Too many investors make poor decisions when attempting to hedge risk, often allowing their emotions to override core portfolio construction rules," he says.

Lees recalls one investor taking a large bearish position against US equities through a geared ETF, only to lose significant money as markets moved the other way.

Overreacting to uncertainty is damaging enough. Varrall's argument, however, suggests that waiting it out may be just as costly, if the backdrop investors are waiting to return to no longer exists.

What resilient portfolios have in common

Lane and Lees share the same starting point: diversification, quality and balance. How they get there differs.

"Numerous studies show that a well-formed strategic asset allocation accounts for over 90% of portfolio returns. Not all assets move in the same direction at the same time, so it is important to have a mix of Australian shares, international shares, property, fixed interest and cash," Lane says.

Lees is broadly aligned, but emphasises that diversification alone is not enough. The quality of what sits inside the portfolio matters just as much.

"The challenge here is balancing the different drivers of portfolio returns. Ensuring the equity exposure has sufficient diversification whilst holding quality blue-chip investments, retaining high-quality bonds, holding assets offering a level of inflation protection like inflation-protected bonds and infrastructure assets." 

He also flags a currency consideration often overlooked by retail investors: around half of international equity exposure should be held in hedged ETFs.

Neither adviser suggests abandoning growth assets. The focus is on balance. Gold, infrastructure and inflation-linked bonds all have a role to play, but moderation matters.

Where the experts differ

Ask both advisers what a resilient portfolio needs and the answers converge. Ask them how to build one and the approaches diverge.

When it comes to investing for the long-term, Lane has a clear plan.

"A growth portfolio with a long-term strategic asset allocation of 80% growth (35% Australian equities, 35% international equities, 5% property and infrastructure, 5% alternatives) and 20% defensive (15% fixed interest, 5% cash). Although this won't be appropriate for everyone, this portfolio should provide healthy long-term returns."

Lees tilts slightly more international than domestic, advocates for 50% currency hedging on offshore holdings, and is more cautious about concentration risk in passive vehicles.

"Try to find quality active ETFs from good managers in this environment; many passive ETFs have high concentration risks."

On the defensive side, Lees urges restraint, particularly around gold, infrastructure and inflation-protected bonds, and is equally sceptical of crowded trends like private credit.

"A portion in gold, infrastructure, and inflation-protected bonds is essential to a resilient portfolio, but don't go overboard and stack it with them. No more than 5% each," he says. "Be careful with private credit. It was the trendy asset class several years ago, and tremors are appearing. Always be cautious following the herd when particular asset classes become trendy. Usually, it ends up in pain."

The differences in approach are real, but the destination is the same: a portfolio built for multiple outcomes, not a single prediction.

Building for a world that may not snap back

If there was one idea that connected all three experts, it was that investors should spend less time trying to predict the next geopolitical shock and more time preparing for a world where uncertainty persists.

That does not mean abandoning growth or becoming fearful. It means building portfolios that can absorb volatility without requiring perfect foresight.

The decade ahead, Varrall argues, will not just reward investors who pick the right sectors or geographies. It will reward those who understand how political risk, policy shifts and changing market access flow through to specific businesses and asset classes over time.

As she puts it: "Decisions on where to invest, who to partner with, and how to structure supply chains are increasingly shaped by political risk, not just commercial considerations."

For investors, the challenge may no longer be surviving the next crisis, but accepting that uncertainty itself is now a permanent feature of the investment landscape.