Ep 390: Wealth First Principles #3: How to build a share portfolio that works

Jan 6, 2026

Explore the superpower of shares versus property and learn to build a resilient portfolio with a simple, rules-based framework. Discover why indexing beats active management, and the importance of the equity risk premium in capturing market returns. Avoid common pitfalls like over-trading and performance-chasing, while understanding the value of global exposure in tech and healthcare. Get practical steps for setting investment goals, diversifying, and maintaining discipline to ensure shares work alongside property for long-term success.

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ADVICE

Prefer Low-Cost Rules-Based Investing

Use simple, rules-based strategies with low-cost index funds or diversified ETFs.
Capture market returns cheaply instead of chasing active managers who usually underperform.

INSIGHT

What Actually Drives Share Returns

Future stock returns come from earnings growth, dividends/franking credits, and valuation changes.
Seek markets with attractive valuations and sustainable earnings to improve expected returns.

ADVICE

Avoid Four Common Investor Mistakes

Avoid over-trading, market timing, chasing performance, and abandoning strategy in downturns.
Use a disciplined rules-based approach to remove emotion and improve long-term outcomes.

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Shares play a different role than property, and that’s their superpower. In this third Wealth First Principles instalment, we outline a simple, rules-based framework to build a resilient share portfolio that complements property: liquid, globally diversified, tax-aware, and low-cost. The evidence is clear: most active managers and stock-pickers underperform over time. Instead, capture the market return with index funds or diversified ETFs, then let discipline, not prediction, do the heavy lifting.

We unpack what truly drives returns (the Equity Risk Premium), why volatility is the “price of admission,” and how dividends and franking credits fit into a broader, global allocation. Avoid the big four mistakes: over-trading, timing, performance-chasing, and abandoning strategy in downturns. For investors seeking extra robustness, we discuss rules-based alternatives to plain market-cap indexing (equal-weight, value, quality, factor tilts), useful now given concentration risks.

Because Australia is ~1.7% of developed markets and concentrated in banks/resources, we make the case for meaningful global exposure to technology, healthcare, and leading consumer brands. Finally, a practical blueprint: set goals and allocation, pick low-cost structures (e.g., DHHF, VDAL, or factor-tilted ETFs), rebalance to a written policy, and stay the course. Do this consistently, and shares become a dependable engine alongside property for decades.

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