What ‘build your own’ actually means
Building your own portfolio with CFS doesn’t mean picking individual shares. You’re choosing investment options – professionally managed funds that each hold dozens or even hundreds of underlying assets.
Instead of picking individual companies or stocks, you choose:
- the mix of asset classes you want in your portfolio (e.g. Australian shares, international shares, property etc.), and
- which managed fund(s) you want to invest in within those asset classes.
The upside of building your own portfolio is control. [JD1] For example, you can ‘tilt’ your portfolio towards certain asset classes, exclude others, and adjust the mix as and when you want to. A trade-off is that the decisions, and the reviews, are your responsibility to manage.
Don’t want to build your own portfolio?
CFS offers ready-made portfolios that provide instant diversification across a range of asset classes. You choose the risk profile that suits you and our team manages your portfolio on your behalf. Learn more about our ready-made portfolios.
The four decisions to build your own portfolio
How long is your money invested for?
Timeframe is the first decision because it determines everything after it.
Generally, money you need within two years shouldn’t be exposed to significant market movement, as there may not be time to recover from a fall before you need to spend it. Money invested for a decade or more can carry far more growth exposure, because short-term falls have time to recover.
Before you invest, be clear on your goals – remembering the difference between short-term saving and long-term investing.
How much movement can you live with?
This is about behaviour, not arithmetic. A portfolio that falls 25% in a bad year is more manageable if your timeframe is long, and if you don’t have to sell at the bottom. A costly mistake in investing is building a portfolio more aggressive than your temperament, then abandoning it after a fall – which converts a paper loss into a real one.
Our risk profile tool can help you determine what risk level may be appropriate for you.
What mix of asset classes?
An investment portfolio is typically made up of growth assets (shares, property, infrastructure and alternatives) and/or defensive assets (fixed interest and cash).
This one decision often drives most of your long-term return and most of your short-term movement, and often matters more than getting the selections with each asset class right. Remember:
- A higher percentage of growth assets suits a longer timeframe and higher risk tolerance.
- A lower percentage of growth assets suits a shorter timeframe or lower risk tolerance.
You can find some example portfolio structures below.
How many options do you actually need?
There’s no set number of investment options that’s right for everyone. What's most important is having an appropriate level of diversification across asset classes, investment styles and managers that aligns with your goals, risk profile and investment timeframe.
For some investors, a single diversified or ready-made portfolio may provide enough diversification on its own. Others may choose to combine multiple investment options to gain exposure to different asset classes or investment approaches.
When building a portfolio, it's worth considering how your investments work together. Holding multiple options that invest in similar assets may not significantly improve diversification and can make your portfolio more complex to manage.
The focus should be on building a portfolio that suits your needs, rather than simply increasing the number of investments you hold.
Want peace of mind about your financial future?
CFS offers a range of financial advice options to support you at every stage of life.
Why diversification matters
Learn more about asset classes and diversification in our beginner’s guide to investing.
What diversification protects you from
Diversification means spreading money across investments that don’t all move the same way at the same time. The aim is to manage the risks associated with investing – if one company or sector falls out of favour, a diversified portfolio can help absorb it.
Diversification also means giving up the chance of an extraordinary return from picking one ‘winner’. But for most people building long-term wealth, that trade-off is worth it to avoid extraordinary losses.
What it doesn’t protect you from
Diversification can’t prevent your portfolio from a board market correction. When markets fall globally – as they did in 2008 and again in early 2020 – most growth assets fall together.
What can protect you in those periods is your defensive allocation and/or your timeframe. While defensive assets will typically perform better when growth assets fall, a long-term timeframe is critical to ensure you can give growth assets time to recover.
Example portfolio structures
A diversified portfolio typically includes a mix of asset classes. While the right combination for you will depend on your risk appetite and goals, some common portfolio structures include:
- Conservative – 20-40% growth assets, 60-80% defensive assets
- Moderate – 40-60% growth assets, 40-60% defensive assets
- Balanced – 50-70% growth assets, 30-50% defensive assets
- Growth – 70-80% growth assets, 20-30% defensive assets
- High growth – 80-100% growth assets, 0-20% defensive assets.
These are illustrations only, not recommendations. But once you’ve decided on what asset class mix you want in your portfolio, you’re in a better position to choose individual investment options
Reviewing and rebalancing
Investment market movements can shift your portfolio away from your original asset allocation. For example, after a strong run in shares, a portfolio built at 70% growth might drift to 80% - meaning you’re carrying more risk than you originally intended.
‘Rebalancing’ means adjusting back to your target weighting[JD1] s (your initial asset allocation percentage).
How often do you need to review?
A common approach is to review once a year, or whenever an asset class has drifted more than about five percentage points from its target. More frequent rebalancing adds transaction costs without adding much benefit.
One caution when investing outside superannuation – selling units to rebalance can trigger a capital gain. Inside super, the tax treatment is different. You should seek tax advice before making any significant changes.
If you’d rather not have to rebalance your portfolio, consider our ready-made portfolios that are rebalanced by the CFS investment Team. Learn more about our ready-made portfolios.
How to open an account
Open an account
Provide your contact details, address, tax file number and identification. We’ll need to verify your identity as part of the process.
Choose your investments
Select a ready-made portfolio or build your own using 200+ investment options. Decide how much you’d like to invest in each option
Fund your account
Make your initial investment via BPAY, EFT or direct debit. Add to your investment at any time or set up a regular investment plan.
Frequently asked questions
Each investment option has a minimum investment, so the starting minimum depends on how many investment options and which ones you choose. A typical minimum investment is $1,000 per investment option. Or you can invest in a ready-made portfolio with as little as $1,000.
CFS offers a range of ETF Exposure Series funds, which provide access to exchange-traded funds (ETFs) through a CFS investment account. These funds invest predominantly in an underlying ETF, allowing you to access a range of markets, sectors and asset classes without needing to buy and manage ETFs directly on the ASX.
In addition, the CFS investment menu includes 200+ investment options, including managed funds, index funds and ready-made portfolios. Depending on your goals and preferences, these can provide similar benefits to ETFs, such as diversification and access to specific asset classes.
You should consider rebalancing your portfolio once a year, or when an asset class drifts more than about five percentage points from its target. Outside super, check the tax consequences first — selling units can trigger a capital gain.
Yes, you can switch between investment options within your account. Switching may have tax consequences outside superannuation, because selling units can trigger a capital gain. Check the PDS and consider getting advice before making changes.
You don’t need a financial adviser to open a CFS Investments account. However, if your situation is complex or you’re looking for a more customised portfolio, you may want to explore our financial advice options.
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Avanteos Investments Limited ABN 20 096 259 979, AFSL 245531 (AIL) is the trustee of the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557 and issuer of FirstChoice range of super and pension products. Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (CFSIL) is the responsible entity and issuer of products made available under FirstChoice Investments and FirstChoice Wholesale Investments.
Information on this webpage is provided by AIL and CFSIL. It may include general advice but does not consider your individual objectives, financial situation, needs or tax circumstances. You can find the target market determinations (TMD) for our financial products at https://www.cfs.com.au/tmd which include a description of who a financial product might suit. You should read the relevant Product Disclosure Statement (PDS) and Financial Services Guide (FSG) carefully, assess whether the information is appropriate for you, and consider talking to a financial adviser before making an investment decision. You can get the PDS and FSG at www.cfs.com.au or by calling us on 13 13 36.