With interest rates shifting, markets evolving, and global conditions changing, successful wealth management requires both protection and growth strategies.
Finding the right balance between driving growth and protecting capital requires a disciplined approach to portfolio construction that helps your wealth remain resilient and support your long-term goals, market cycles, and inflation.
Many investors think balance means diversification. In reality, balance is about understanding how each investment contributes to both growth and protection, and whether the overall portfolio is strong enough to withstand challenging market conditions.
There is no one-size-fits-all answer. Depending on age and life stage, some investors pursue aggressive growth, while others prioritise capital preservation.
Low-correlated investments don’t usually move in the same direction as shares. As a result, they can help smooth out volatility and reduce overall portfolio risk. Their relationship with shares is weak or even negative. Common examples include government bonds, gold, certain hedge fund strategies and commodities.
Defensive assets are designed to hold their value or outperform during market downturns. They’re typically selected for their stability and ability to protect capital. Examples include cash, high-quality bonds, defensive equities (such as utilities and healthcare) and infrastructure.
Balancing growth and risk
Growth typically comes from listed equities, private equity, venture capital, real assets, and exposures to long-term trends spanning multiple sectors. For example, healthcare innovation, energy transition or AI.
The trade-off? Growth usually comes with bigger ups and downs. When markets drop, there may be pressure to sell at exactly the wrong time.
Defensive equities can help provide balance. These are shares in companies that generally deliver stable earnings and dividends, regardless of whether the economy is booming or in a recession. They tend to have strong cash flow because they sell essential goods and services, such as power, food, and medicine, and have raised prices to cover rising costs without losing customers.
While a portfolio traditionally relies on bonds and cash, some would say that in today’s environment, a broader mix of assets may be more beneficial.
Other strategies
Other protective strategies may include buying bonds that mature at different intervals, such as annually over five years.
Physical investments, or real assets, such as real estate, infrastructure, commodities, natural resources, and equipment, can serve as hedges against inflation when the cost of living increases, the value of physical assets tends to rise.
Alternatively, you could consider floating-rate exposure or inflation-linked bonds (known as Treasury Indexed Bonds (TIBs) in Australia and Treasury Inflation-Protected Securities (TIPS) in the US).
Floating-rate bonds adjust interest payments as rates change, while TIBs increase principal and interest when inflation rises, providing a hedge against rising prices.
TIBs offer further protection with a built-in deflation floor that protects your original investment if prices fall.
How currency shapes your returns
If you invest globally, currency matters. So, foreign exchange planning should be an intentional decision rather than a portfolio by-product.
At the same time, unhedged exposure can lead to larger returns. A partial hedging strategy, for example, hedging some developed-market bond exposures, can help balance potential risk and opportunity.
Next steps
Protection starts with a clear liquidity plan. For families using trusts, SMSFs, or investment companies, having enough cash or short-term assets to cover 12–24 months of expected needs – such as tax, capital calls, or distribution – provides a solid foundation for confidence and flexibility.
Your local Nexia Adviser can help you navigate opportunities, unlock your portfolio’s potential, and make sure it’s positioned to grow while keeping your protection needs in view. We’re with you every step of the way.
