Is It Ever OK to Invest in a Single Asset Class?

If you spend enough time around successful investors, you’ll notice a recurring theme: diversification. It’s as foundational to investing as a good diet is to long-term health. And yet, time and time again, I meet people with significant wealth tied up in a single asset class — often, it’s property. So, is that ever OK?

Let’s start by acknowledging the emotional pull of property. In Australia especially, bricks and mortar are more than just an investment — they’re cultural. We understand it. We can see it. Many of us have done well out of it.But here’s the reality: putting all your financial eggs in one basket — no matter how solid that basket feels — introduces a significant risk that can’t be diversified away. Property, like any asset class, goes through cycles. It can be illiquid. It’s sensitive to interest rates, credit availability, and government policy. And sometimes, it’s just out of favour.Now, that doesn’t mean property isn’t a great asset class — it absolutely is. But great doesn’t mean everything. Because no single asset class will outperform in all market environments, and no investor can consistently pick what’s going to win next.

A 20-Year View Backed by Real Data

To illustrate the importance of diversification, let’s look at actual performance data compiled by Vanguard Australia and J.P. Morgan Asset Management. These studies track the annual returns of major asset classes over the past two decades.What they reveal is this: no single asset class consistently outperforms. For example, Australian equities may lead one year, only to be eclipsed by international shares or property the next. Bonds and even cash have, at times, outperformed riskier assets during downturns.Here’s a sample from the J.P. Morgan 2024 chart:

Source: J.P. Morgan Asset Management – Guide to the Markets Australia, Q1 2024

This rotation in performance highlights the unpredictability of markets. Diversification cushions the impact of underperformance in any single asset class — and over time, that consistency becomes a major advantage.

When Concentration Might Be Justified

For high-net-worth investors, there are circumstances where concentrating in one asset class can make sense — for a time. You might be running a business in a specific industry. Or you may have built your wealth through property development, and you’re leveraging your expertise to generate strong returns. That’s valid. But even then, the question becomes: what’s the long-term plan? As your wealth grows, so should your mindset shift from wealth creation to wealth preservation. And that’s when diversification is no longer optional — it’s essential. At Hewison Private Wealth, our role is to help you strike that balance. We build investment strategies across single, or multi-layered structures, tailored to your overarching objectives and stage of life — always with an eye to preserving and growing wealth across generations. Property might well be a pillar of that plan — but it shouldn’t be the whole house.