Markets rise, markets fall, sometimes dramatically. Even over decades, the ride can feel like a rollercoaster, leaving investors unsure of whether they’re moving forward or just holding on. That’s why diversification is often called the golden rule of investing. But here’s the catch – for many, diversification still means a simple mix of shares, bonds, and maybe a property or two.
The reality is that yesterday’s version of diversification isn’t enough to protect wealth in today’s environment.
True diversification isn’t just adding more shares or more bonds. It’s about mixing different types of assets, including alternatives, that don’t move in lockstep. Done well, modern diversification creates resilience, protects against shocks, and helps wealth steadily grow even when traditional markets stumble.
Why “old diversification” isn’t enough
For decades, the traditional portfolio (a mix of shares and bonds) was considered the textbook balance. Add property investment, and many investors felt safe. But cracks in that old model are now clear.
- Bonds no longer cushion portfolios the way they once did.
- Property isn’t bulletproof. Structural changes in residential, office and retail markets, along with major equity market drops, can significantly affect property values.
- Shares remain vulnerable to the big swings that dominate headlines.
This traditional approach leaves portfolios exposed to global shocks, inflation, and prolonged downturns. What looked “diversified” on paper often turns out to be multiple versions of the same risk.
How modern diversification works
Modern portfolio thinking recognises that resilience doesn’t come from adding more of the same. It comes from blending traditional investments with carefully selected alternatives.
Alternatives, including private equity, private credit, infrastructure, commodities, hedge funds, and niche strategies managed by skilled specialist managers, open new return streams that don’t move in step with shares, bonds, or property.
The benefit is clear:
- Reduced correlation – alternatives move to different cycles than mainstream assets.
- Reduced volatility – smoothing out the bumps creates a steadier growth path.
- Broader opportunity – instead of relying on narrow markets, investors access global growth streams.
What $100k in alternatives could look like
Consider this simple example of an investor who placed $100,000 into a diversified set of alternative strategies back in 2015. Instead of the sharp peaks and deep troughs of the market, alternatives delivered a steadier climb. By avoiding large drawdowns, investors didn’t waste years just recovering losses. That protection allowed wealth to compound more effectively.
The chart below shows how a traditional $100k balanced portfolio¹ (60% shares, 40% bonds) performed during this period, compared with Saxe Coburg’s balanced portfolio.
Over time, this difference adds up. Avoiding large drawdowns means investors don’t need to spend years just getting back to where they started. Protecting capital through the rough patches is what allows wealth to compound more effectively.
By comparison, the traditional portfolio exposed that same $100k to far bigger swings, and much more uncertainty about outcomes.
Building resilience in your portfolio
Diversification is not about having “more funds.” It’s about having the right mix of investments that respond differently to the same environment.
A truly diversified portfolio includes a balance of traditional and alternative assets, carefully structured to reduce reliance on any single market. This resilience allows investors to keep moving forward, even when headlines are dominated by downturns.
Transparent, trusted management you can count on
Alternatives bring significant opportunities, but they require expertise and skill. Liquidity, fees, and structures can vary, which is why rigorous due diligence and careful manager selection are essential.
Choosing experienced managers with proven expertise is another key way to help reduce investment risk.
At Saxe Coburg, this is the foundation of how we manage wealth for our clients. We work with specialist managers across private markets, liquid alternatives, and niche strategies, blending them with traditional investments to create portfolios that are both robust and adaptable. For over 30 years, Saxe Coburg has consistently protected client capital, often generating positive returns during challenging market conditions.
The chart below compares our clients’ average performance during major global equity declines (as measured by the MSCI World Index) over the past 20 years. The more traditional 60/40 Balanced Index benchmark is provided for comparison.
Comparison of average performance during major global equity declines
What’s next?
Markets will always move through cycles. The question is whether your portfolio is designed to weather those shifts or simply ride them out. True diversification, can help beat the market rollercoaster, providing a smoother, more reliable path to long-term growth.
Not sure if your portfolio is truly diversified? Let’s find out. Get in touch today for an obligation-free conversation on how alternatives can help build resilience into your strategy.
Check out The Alternative Advantage for more insights on building smarter strategies for
steadier growth, greater resilience, and wealth that lasts across generations.
¹The Traditional Balanced Portfolio in the graph is benchmarked using the following formula: 10% NZX50. 10% All Ords, 32.5% Global, 7.5% Property, 32.5% Bonds and 7.5% Cash.