Young & Invested: 3 things I don’t hold in my portfolio
Why select crowd favourites don’t make the cut.
Welcome to my column, Young & Invested, where I discuss personal finance and investing for Gen Z and Millennials.
This column aims to be a resource for young investors navigating an ever changing financial, political and social landscape as they try to build wealth. Tune in every Thursday for the latest edition.
Edition 47
This job requires me to spend a lot of time digging through investments. When looking through every asset class imaginable, you come across a lot – the good, the bad and the “who approved this?” end of the market.
Luckily, investors don’t have to own everything to be successful. Behind the scenes, my own portfolio is surprisingly simple. There are a few crowd favourite investments that I’ve decided to skip entirely and I want to explain my thinking behind the choices.
This is far from a comprehensive manifesto. Everyone will have their own list of absolutely nots, but I think there’s value in being transparent about what I don’t buy into as much as what I do.
Gold
We know that asset-class returns fluctuate significantly over time. The theory goes that incorporating a diverse range of asset classes can help moderate portfolio risk and improve risk-adjusted returns. Thus, investors are often encouraged to include asset classes with historically low or negative correlation for a more optimal outcome. Gold is one of these.
The gold price has recently experienced a huge run-up over the past year, so its exclusion in my portfolio is bound to raise some eyebrows. The commodity has certainly shown some merit as a safe haven during periods of market crisis and has delivered a reasonable return over the long term.
Source: VanEck. May 2025.
Despite that, the main reason why it’s excluded from my portfolio is that it isn’t a growth asset. It doesn’t pay dividends and doesn’t make a profit or loss, so the inherent price is largely driven by market sentiment. The only way to generate a positive return on gold is to sell it to someone who is willing to pay more for it than you did. This is largely where my discomfort stems from.
I acknowledge it forms a theoretical portfolio cushion during market shocks, but as someone with a longer time horizon and enough cash in my emergency fund to weather drawdowns, it’s tough to rationalise.
There’s also a broader point about diversification vs hedging that sometimes gets overlooked. Investors often have disparate views on both. Hedging refers to removing a specific risk in a portfolio, not collecting negatively correlated assets for the sake of it. Some people champion gold’s low correlation and resilience during market turmoil – but is this something investors actually want?
Source: World Gold Council.
Over the long run equities have risen substantially, so holding assets that are negatively correlated isn’t something most long-term investors would find ideal. Unless you’re in the camp of doomsayers who believe equities will experience a significant downturn in the long term, it doesn’t make much sense to favour negatively correlated assets.
Bonds
I don’t think the exclusion of this asset is incredibly controversial for someone with a long investing horizon. Traditionally the role of bonds has been to reduce the volatility of a portfolio and generate income for its holder. Now whether they continue to be effective in doing so is entirely up to debate. Anyway.
Bonds are excluded from my portfolio for a multitude of reasons. The most foundational being that their function simply doesn’t align with what I’m hoping to achieve. With decades of earning potential ahead, my main objective is to maximise long-term returns through exposure to growth assets. This often comes at the expense of enduring higher volatility (as measured by standard deviation*), but this is a trade-off I’m willing to make.
It’s also no secret that bond returns have paled in comparison to equities. Over the last 30 years Aussie bonds have returned around 5.5% p.a. whilst Aussie equities delivered 9.3%. If we take these long run averages at face value, holding a traditional 60/40 portfolio of equities to bonds over the last 30 years would have delivered roughly 7.8%, compared to an all-equities at 9.3%. Of course, no one’s pretending the all-equity option wouldn’t have come with significant and prolonged drawdowns that many would find difficult to endure.
Projected returns are important however they can be somewhat unreliable. Investing isn’t about betting everything on whatever you think will deliver the highest return. If it were, you’d probably find me at the casino instead. Excluding bonds is a decision that has come from understanding my goals, investment horizon and philosophy on risk.
I hold an all-growth portfolio, meaning 100% of my asset allocation is in equities. Given I’ve established an emergency fund, I find it difficult to justify allocating a portion of assets to a defensive position simply for the sake of experiencing lower volatility and smaller drawdowns. However, that is not to suggest younger investors shouldn’t hold any defensive assets as risk tolerance is highly subjective.
Crypto
Excluding crypto is a bit of a contentious choice, especially for someone in my age bracket. It feels sacrilegious to admit I don’t invest in any.
Crypto’s appeal is obvious. The stories are everywhere. Someone who bought at the right time, held with diamond hands and walked away with life-changing returns.
You only ever hear from the winners. The losers aren’t exactly rushing to make TikToks about how they wiped out their savings, so I’ll take one for the team. I used to dabble. Not only dabble but I managed to lose a significant chuck of money during my early years at uni.
The feeling it gave me was uncomfortably similar to the one you get at the casino – driven more by adrenaline than any real knowledge or conviction. I think that’s the point for some people, however for me it was a sign that it’s much closer to Sportsbet than an asset class that belongs in my portfolio.
I’m aware my aversion probably comes across as someone who’s been burned and consequently sworn off it, but I’m sure many share this experience. I have a full time job, hobbies to pursue and live in what I consider to be the best place in the world. Investing was always intended to complement my life rather than control it. I don’t want to waste my days obsessively checking my crypto wallet hoping to capitalise on a sudden uptick in some speculative coin I bought that morning.
I also acknowledge that I don’t have the industry knowledge that would give me an edge over other speculators navigating the asset class. Retrospectively, it would have been favourable to hold a small allocation to Bitcoin at the beginning of my investment journey, and there are plenty of studies to reinforce that. Importantly, these often assume that the investor would have the tenacity to hold during all the many sharp drawdowns and surges.
*Standard deviation is often used as a proxy for investment risk. This calculates how widely a stock or portfolio return varied from the average over a historical period. Using the standard deviation of historical performance can help investors estimate the range of returns for a given investment. A high standard deviation implies that the predicted range of performance is wide and therefore the investment has greater volatility.
