Diversification explained: why it matters for long-term investing

Chief Investment Officer Ben Squires explains what diversification in investing is.

A simple way to understand investing is to think about a forest. A forest doesn’t rely on just one type of tree, one water source, or one perfect season. It survives because it’s diverse. Different plants respond differently to heat, wind, drought, and storms. This diversity helps the forest stay strong over time.

Investing works in a similar way.

At NGS Super, portfolios are built with the understanding that markets, like nature, go through different conditions. There are periods of growth and stability, and there are times of uncertainty. The goal is to build a portfolio that can grow over the long term in many different environments.

Why diversification matters

When global markets face uncertainty, investors can become concerned, especially when markets become volatile. In response, they may shift their investments towards assets perceived as safe havens, such as gold or cash. This is where diversification becomes particularly important.

When uncertainty rises, different investments respond differently. Some assets may fall in value, while others may perform better, helping to balance the portfolio.

That is why portfolios include assets such as commodities, gold, and other defensive investments. These assets may not lead performance all the time, but they can help support the portfolio during more challenging periods.

A long-term approach

Nature shows us that resilience does not come from avoiding change, but from being prepared for it.

The same idea applies to long-term investing.

Superannuation is designed to grow over many years. Periods of market volatility are normal, and history shows that markets often recover once uncertainty settles. In fact, some of the strongest market recovery days can occur during times when investors feel most uncomfortable.

For this reason, reacting quickly to short-term market movements, such as switching to cash after markets have already fallen, can harm long-term investment outcomes.

Staying focused on the long term

The role of NGS Super is to remain disciplined, diversified, and focused on long-term outcomes for members.

Rather than reacting to every headline or short-term market change, the focus remains on ensuring the portfolio is well positioned across a wide range of possible economic conditions.

This long-term approach is designed to help members continue building their retirement savings, even during periods of uncertainty.

Talk to an NGS Super Specialist

You can speak with one of our Super Specialists. It’s complimentary, and they can answer your general questions about superannuation, investments, insurance or transition to retirement.