From shares to portfolios: How to build a resilient investment strategy

By spreading your investments across asset classes, 

geographies, and industries, you reduce the impact of any 

single event derailing your financial plan

The big picture

What it really means to own a share? Should one think like an owner or a speculator. But ownership of a single company isn’t a plan. The real question is: how do you turn ownership into a strategy that grows with you over time?

When I advised clients in New York, one principle guided everything: Make sure your money lasts as long as you do. With life expectancy rising and living costs creeping up, most people underestimate what retirement truly requires. The biggest risk isn’t a rough quarter in the market; it’s running out of money while you still have decades ahead.

Where does risk actually come from?

Thinking like an owner is powerful, but ownership carries risk. A single stock can be hit by idiosyncratic (company-specific) risk, a product recall, a governance failure, or a debt problem. And that’s only one layer. A practical way to think about risk is in four tiers:

• Country risk – macro shocks that affect everything in the country. We saw this during the economic crisis: equities fell broadly, and the sovereign default drove bond prices down. The currency devalued, and overnight affordability was halved. 
• Market risk – Factors like inflation, interest rates, and recessions that move entire asset classes (equities vs. bonds) irrespective of the country. Holding cash during inflation will reduce your purchasing power.
• Sector risk – Industry-level shocks. After the Easter attacks, tourism revenues plunged; hotel earnings fell; equity prices dropped; and lenders marked the sector debt down.
• Company risk – Firm-level issues, strategy missteps, poor management, over-leverage, or even fraud. Many successful companies have crumbled in the past, and will do so in the future. 

Think of risk like a cricket match: country risk is the pitch condition, market risk is the overall match situation (run rate, ball swinging), sector risk is your batting lineup’s form, and company risk is the individual batter at the crease. You can’t change the pitch, but you can pick the right lineup and play the right shots.

We’ve become familiar with versions of each: a tariff cut squeezes solar margins, and suddenly an entire industry is in retraction; a pandemic freezes tourism overnight, and the serviceability of loans becomes a huge challenge. If you hold one stock, you take all four risks. If it happens to be a winner, you’ll look brilliant, but that’s luck, not a repeatable plan.

Why diversification matters

As the saying goes, don’t put all your eggs in one basket. Diversification isn’t a cliché, it’s mathematical protection. By spreading your investments across asset classes, geographies, and industries, you reduce the impact of any single event derailing your financial plan. Let’s look at some key asset classes and the role each plays in building a resilient portfolio:

• Equities: Owning businesses and growing wealth

Equities remain the most effective long-term wealth creator. But not all shares are the same. Mature blue-chips offer a company with established business moats, diversified income streams, and steady dividends. Growth companies are forward-looking businesses that reinvest earnings to capture emerging demand through innovation and market disruption. You also have defensive sectors that hold steady during recessions, and cyclical firms that outperform in expansions.

Some Sri Lankan companies generate export receipts, providing a natural currency hedge, particularly valuable given limited access to foreign investments. This is why holding a portfolio of equities, across sectors and business types, matters. 

• Fixed income – Stability and predictability

Bonds, Treasury Bills, and fixed deposits form the income-generating backbone of most portfolios. Many investors stop at bank FDs, but opportunities extend further. Corporate debentures, for example, offer higher yields and defined maturities. These fixed-income instruments provide predictable cash flows and help preserve capital during volatile periods. 

• Cash – Liquidity and optionality

Cash isn’t idle money; it’s optionality. It allows you to respond to market corrections, emergencies, or new investment opportunities without having to sell other assets at the wrong time. Money market funds are a practical vehicle here, offering strong returns with same-day liquidity. Think of cash like having petrol in the tank; you don’t always need it, but you’ll regret not having enough when life stalls.

• Alternatives – Inflation and currency hedges

Alternatives such as real estate and gold serve as buffers against inflation and currency depreciation. While direct property investment can be expensive, exposure can be gained through real estate-focused listed companies. There are many other alternative investment strategies that we can explore when building portfolios. 

Building your portfolio

When constructing your portfolio, consider a few key areas. These questions will help guide you in articulating your needs:

• Investment horizon: How long until you’ll need the funds? When do you plan to retire? 
• Retirement needs: How much income must your savings replace? 
• Income sources: Are they stable, or do they fluctuate? Do you expect your income to continue?
• Risk appetite: How much volatility can you withstand without panic-selling? Do you get anxious when you have losses? 

When you decide on your investment mix, it doesn’t need to be permanent; it can evolve as your circumstances change. That said, discipline is essential. You should always begin with a core allocation made up of long-term, stable holdings. At a broad level, this mix should be designed to deliver reasonable growth without taking excessive risk. Once this core is established, you can then layer in tactical investment decisions.

For example, if interest rates are expected to rise, you might reduce exposure to long-term bonds and hold more short-term instruments. During a market recovery, you could tilt slightly toward cyclical sectors such as construction or banking, which tend to benefit early in an upturn. Similarly, when uncertainty rises, say during an election cycle or global crisis, adding to defensive holdings like consumer staples or healthcare can provide stability.

Think of it like cooking. Your core allocation is the main recipe, say, rice and curry, the foundation you always come back to. It’s balanced, reliable, and keeps you fed. The tactical moves are the little tweaks you make, depending on what’s in season, adding a mango salad in summer or extra spice when it’s cold. Those changes make the meal interesting, but they don’t replace the base.

Remember, selling at the wrong time hurts far more than missing a rally. Investing is about surviving long enough for compounding to work in your favour.

Building a portfolio: A simple rule of thumb

This framework is for general guidance only and is not personalised investment advice.

A simple way to think about building a portfolio is to align it with your stage of life. Younger investors, with time on their side, can afford to lean toward growth, often with a higher allocation to equities. As retirement approaches, the focus typically shifts toward stability, income, and liquidity.

As an illustration, a young professional might hold roughly 70% in equities, 20% in fixed income, and the balance in cash and alternative assets. A pre-retiree or retiree, by contrast, may prefer something closer to 30% equities, 60% fixed income, with the remainder in cash and alternatives.

The logic is straightforward: the closer you are to needing your money, the less risk you can afford to take. Portfolios should gradually move away from growth assets toward those that protect capital and provide steady income.

Personal circumstances matter just as much. Business owners, for example, often already have a large portion of their wealth tied to a single company or industry. In such cases, the investment portfolio should offset that concentration, not reinforce it. Holding more fixed income, cash buffers, or assets that behave differently from the core business can provide essential balance.

Finally, it is important to remember that discipline matters more than prediction. No one can consistently forecast markets. What does matter is saving regularly, staying invested, and rebalancing periodically. After a strong equity run, portfolios often drift away from their intended mix. Rebalancing helps restore discipline, refocusing on long-term goals rather than reacting emotionally to short-term market moves. This is what separates investors from speculators.

Every portfolio should also balance liquidity, that is, how quickly your investments can be turned into cash. The aim is to earn reasonable returns for the level of risk taken, without sleepless nights or being forced to sell assets during emergencies because insufficient cash was set aside.

In the end, investing is less about timing the market and more about building a system you can live with. Think like an owner, but don’t bet the house on a single idea. Diversify, stay disciplined, and keep enough liquidity to handle life without panic. The goal isn’t to predict every turn; it’s to stay invested long enough for time and compounding to do the work.