Or, why putting all your money in one thing is a terrible idea
In investing, just like in life, balance matters.
Nobody survives on ugali alone. Kachumbari without nyama choma might pass as a salad, but it's not a meal. And while we all know someone who claims to thrive on choma alone, even they eventually need something on the side.
The same principle applies to your money. A well-built portfolio isn’t just a pile of your favourite asset class. It’s a carefully structured plate, a blend of returns, risk, liquidity and time, built to match your life, not just your appetite for reward.
Unfortunately, many investors don’t build
portfolios. They collect bets.
They chase hot stocks. They dump everything into property. They lock their cash into five-year plans without knowing how to get it out. Then, when markets shift or personal needs arise, they’re stuck, not because they invested, but because they didn’t diversify.
This week on GRC Monday, we look at what it really means to build a portfolio that works.
What diversification really means
“Don’t put all your eggs in one basket” is
sound advice, until you start putting them in just any basket. Diversification
isn’t about owning a little bit of everything. It’s about building exposure
across assets that behave differently under different conditions.
You want growth when the markets are strong. Stability when they’re not. Liquidity when life surprises you. And income when you no longer want to hustle.
A diversified portfolio includes assets that
play different roles. Some grow. Some cushion. Some pay out. Others wait
quietly in the corner until they’re needed. The point isn’t to just maximise
short-term returns, it’s to smooth out the ride and protect the big picture.
Understanding what you're buying
Let’s be honest: most people don’t build portfolios. They collect investments like a Spotify playlist; random, hype-driven and mood-dependent.
But just like a playlist needs balance, your portfolio needs assets that serve different purposes. Every asset has a personality, and the magic is in how you mix them.
Equities are the thrill-seekers. High potential, high volatility. Great for long-term growth, if you can handle the swings. Bonds and sukuks are your stabilisers. They don’t dazzle, but they keep things steady and predictable. REITs sit in the middle, offering income and a link to real estate without the landlord stress. And cash? It’s the quiet workhorse. Underestimated until a crisis hits or an opportunity knocks.
You don’t need everything. You need the right mix, for your income, your goals and your stage of life.
Blending is where portfolios become personal. More risk when you have time. More stability when you don’t. It’s not about copying what your cousin’s doing. It’s about building something that fits your reality, not someone else’s.
The UAE advantage
If you're living and earning in the UAE, you have access to one of the world’s most flexible, tax-efficient investment environments. Local instruments such as sukuks and fixed deposits provide stability in AED. Meanwhile, global platforms offer access to USD-based mutual funds, ETFs and offshore investment accounts.
Combining these allows you to hedge currency risk, gain international exposure and still benefit from the UAE’s zero tax on capital gains, dividends and personal income. It’s one of the few jurisdictions where you can earn globally, compound locally, and spend flexibly. All while staying fully compliant.
Risk isn't the enemy, unmanaged risk is
The conversation around risk is often binary. High risk is seen as exciting, while low risk is treated as boring or conservative. In reality, risk is just a measure of variability. It tells you how much something might move, not whether it’s good or bad.
The key is aligning your portfolio to your timeline and temperament.
If you’re in your early 30s with a long investment horizon, you can afford more volatility in exchange for potential long-term growth. If you’re in your 50s, looking toward retirement, you likely want more stability and income.
The goal isn’t to avoid risk, it’s to understand it. You build a portfolio to absorb shocks, not to ignore them.
Beware the temptation of the trendy
Every year brings a new wave of investment fads. There was crypto. Then gold. Meme stocks. AI funds. And there will be another wave next year.
Most investors enter late and exit early, buying when hype is high and selling when panic hits. This behavioural bias costs more than bad investments ever could. The most consistent portfolios are usually made of the most boring parts: low-fee ETFs, diversified mutual funds and bonds that pay out steadily year after year.
If you’re building a portfolio for the long haul, trends are noise. Focus on structure.
The regulator agrees
Diversification isn’t just smart investing, it’s also regulatory best practice. Financial advisers are expected to recommend portfolios that are suitable and appropriate. That means understanding a client’s goals, risk tolerance, financial situation and offering a mix of investments that reflects that. Why? Because no regulator wants to clean up your mess when the single stock gamble goes sideways.
No adviser should be pushing a single product or locking you into a structure without flexibility. If they are, you’re not working with a planner. You’re working with a salesperson.
Build it like a good plate
A solid portfolio isn’t built in a day. But it can be built intentionally. You want enough growth to stay ahead of inflation, enough income to meet your needs and enough safety to keep going when markets shake.
It won’t always be perfect. It will need rebalancing. But it should feel like something that fits.
Like a good plate, it’s not about the fanciest item on the menu. It’s about the right mix for you, with a little spice, and something to cool it down when things heat up.
Suit your appetite. Then build your portfolio to match.
Gachaga is a compliance, risk and fintech executive.
