It’s tempting to think that, heading into 2026, investing success will come from correctly timing when the ‘AI bubble’ will burst, or from identifying the next wave of winning technology companies.
In reality, most investor outcomes are driven by a small set of decisions that are far less exciting, but far more reliable.
Below are the three things I’d encourage investors to focus on this year if they want their plan to be resilient, regardless of what markets, headlines, or forecasts throw at them.
1) Start with your goals and risk tolerance
Before you start building an investment portfolio, try starting with these two questions:
1. ‘What is this money for?’, and 2. ‘How much risk should I be taking?’.
What is this money for?
It sounds simple, but forces you to define your time horizon and flexibility. Money for a house deposit in 2-3 years should be invested very differently than money for retirement in 25 years.
The closer the spending date, the more you’re exposed to ‘sequence risk’, which is the possibility that a bad run of returns happens just when you need to withdraw.
You don’t want to invest short-term money too aggressively because ‘markets go up over time’, then be forced to sell at the wrong moment because the markets fall just when you need the cash.
How much risk should I be taking?
This is really two separate questions.
There’s ‘How much risk am I willing to take?’ (i.e. your emotional tolerance for market falls), and ‘How much risk am I able to take?’ (i.e. your financial resilience: time horizon, stable income, emergency buffer, debt burden, dependants etc).
These two don’t always match, and most investors should be taking the lower of the two.
For example, if you’re willing to take high amounts of risk, but don’t have the ability to tolerate it (e.g. you have a short time horizon, or no emergency fund), your portfolio should be invested more conservatively.
A practical way to test your risk tolerance is to imagine a drawdown (or market dip) in pounds, not percentages. A 20% fall sounds abstract until you translate it into ‘would I be able to stay invested if my £100,000 portfolio dropped to £80,000?’
For many investors, the honest answer changes when they picture the number. That’s valuable information, because the best portfolio isn’t the one with the highest expected return — it’s the one you can stick with.
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2) Build a diversified portfolio
Once you know the role the money plays, you can construct the portfolio to match it.
For most investors, stocks (also known as equities) and bonds remain the core building blocks.
Stocks are typically the long-term growth engine. High-quality bonds are usually the stabiliser that reduces overall volatility and helps you stay the course during stock market drawdowns.
Many investors find it helpful to construct their portfolio around an evidence-based framework.
For example, Modern Portfolio Theory is often caricatured as a neat mathematical world that doesn’t reflect real markets (and that criticism is fair in places).
Still, it contains two practical lessons that matter for real portfolios.
The first is that you shouldn’t judge investments in isolation, but instead what matters is how each holding behaves inside the portfolio — i.e. how investments move relative to each other.
The second is that diversification is not ‘owning lots of things (please don’t own several S&P 500 trackers!) — it’s combining exposures that don’t all rise and fall together, so you can reduce overall portfolio risk through diversification.
This is also where many investors misplace their effort.
In practice, your overall asset allocation (how much you invest where) is the most important part of portfolio construction. Whether you’re 70/30 or 40/60 in stocks versus bonds is likely to matter far more to your outcome than whether you picked the ‘best’ global equity ETF.
For your equity allocation, broad diversification is the default starting point for most investors. Investing globally spreads your money across countries, regions, sectors and currencies, rather than tying your future to one market’s fortunes.
What if I want a more adventurous portfolio?
If you want to be more adventurous than plain market-cap exposure, then investing in ‘drivers of return’ can be a useful lens.
Academic research has documented long-term patterns, often described as ‘factors’ such as value or smaller-company exposure.
These factors are essentially characteristics that have historically been associated with higher expected returns, but they come with their own distinct risks and can go through long stretches of underperformance.
The point isn’t to chase whichever factor has done well recently, but to understand that you can diversify within equities by blending different sources of risk and return — if you’re willing to stay disciplined when the road gets bumpy.
For your bond allocation, the guiding principle that most investors adopt here is resilience over excitement. Bonds are usually there to reduce portfolio ups and downs and cushion drawdowns, rather than beating the returns from equities over short windows.
In stressed markets, high-quality government bonds (gilts) have historically been more reliable diversifiers than lower-quality credit, which can behave more like equities when risk appetite collapses.
For UK investors, that typically means thinking carefully about gilts and how sensitive the fund you choose is to interest-rates.
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3. Monitor and rebalance
Even a well-built portfolio drifts over time. If equities rally for years, your ‘balanced’ portfolio will eventually become an aggressive one, because your equities will become a larger part of your portfolio over time.
Rebalancing means bringing the portfolio back to its intended risk level when allocations move meaningfully away from their target.
You can do this on a calendar schedule, or based on thresholds, where you only act when the drift is large enough to matter. Either approach can work if it’s applied consistently.
Finally, review your plan as life changes. The best portfolio for you at 30 may be wrong at 45. Income stability, debts, dependants, health, and how close you are to your goals all influence your ability and willingness to take investment risk.
Checking in on your investments every year is usually enough for most people, with additional reviews when there’s a major life event.
Bringing it all together: focus on what you can control
A disciplined investor in 2026 should be focusing on what can be controlled and avoiding what can’t.
You can control your asset allocation, costs, diversification, tax friction, and behaviour. You can’t reliably control short-term market direction, headlines, or which theme will be fashionable next quarter.
So set an asset allocation that matches your goals, diversify broadly and thoughtfully, keep fees and frictions low, avoid tactical noise, and maintain the portfolio through periodic rebalancing and life-stage reviews.
Doing these things consistently (not just in 2026) will mean that you have a much higher chance of meeting your investing goals.
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Important information
Capital at risk. The value of your investments can go down as well as up, and you may get back less than you put in. Past performance isn’t a guide to future returns. ETF costs also apply.
This content is for information only and is not financial advice. If in doubt you may wish to consult a professional adviser for guidance.