How to Build an Investment Portfolio with Caroline Brady
“Portfolio construction” and “asset allocation” are two phrases that can make investing feel inaccessible fast. But under the jargon, the concepts are straightforward. The problem is not that investing is inherently complicated, it is that the language around it often is.
In this episode of The Wallet, Vestpod founder Emilie Bellet is joined by Caroline Brady, Head of Partnerships at Net Purpose and former BlackRock impact investor, to break down how portfolios work in practice.
They cover the difference between stocks and funds, how to think about risk without fear, and how sustainability and impact fit into investing without turning it into a specialist project.
Listen on Spotify | Apple Podcasts
Asset allocation vs portfolio construction, explained simply
Caroline’s simplest framing is a house analogy.
Asset allocation is the structure of the house: how many “rooms” you need, and what each room is for. In investing terms, it is your mix across broad building blocks like equities (shares), fixed income (bonds), and other assets such as commodities or gold.
Portfolio construction is the interior: what you put inside those rooms. That might mean choosing regions, themes, and deciding whether you hold individual companies or funds that contain many companies.
This is a helpful reframe because it stops investing from feeling like one big decision. It is two layers, structure first, then content.
Risk is not a moral judgement, it is volatility
Many people hear “risk” and think “bad outcome.” Caroline frames risk more accurately: it is the volatility in price, the ups and downs you will experience along the way.
Volatility can lead to gains as well as losses. Over long periods, equities have historically grown more than lower-volatility assets, but they fluctuate more in the short term. That is why time horizon matters so much. The closer you are to needing the money, the less useful big swings become.
Caroline also makes a simple point people often miss: taking too little risk can also be risky, because it can leave you failing to outpace inflation.
You are probably already an investor
If you have a pension, you already invest. The first step is not opening a new app, it is understanding what you already own.
Caroline suggests asking your pension provider for:
Your current equity vs bond allocation
The fund holdings inside your default fund(s)
Any concentration you might not realise you have (for example, heavy exposure to US tech)
This matters because people often add new investments without realising they are duplicating the same exposure they already have in their pension.
Funds vs stocks, and why most people should start with funds
Stocks are individual companies. Funds are baskets of many companies (and sometimes bonds too), designed to diversify risk.
Caroline explains two main fund types:
Index (passive) funds that track an index, like a global equity index. These tend to be low cost and diversified.
Actively managed funds where a professional team selects investments. These tend to cost more, and you are paying for research, access, and oversight.
For most people, the simplest start is a global index fund. It puts you in the market, spreads risk across hundreds of companies, and reduces the impact of any single company doing badly.
Active vs passive, how to think about fees
Passive investing is often cheaper because it is designed to track a market index with minimal human decision-making.
Active investing costs more because the work is the product: analysts, portfolio managers, company meetings, and a formal risk process that monitors what the fund is doing.
The right question is not “which is best,” it is “what am I paying for, and do I understand it?” If you choose active, you are choosing a person and a process, and you need a reason to believe that process can be worth the higher fee.
If you want to pick individual stocks, use a simple filter
Stock picking becomes overwhelming when people try to analyse everything. Caroline keeps it grounded.
Start with companies you understand and can follow. The goal is not excitement, it is staying informed enough to hold through volatility. She suggests focusing on:
Whether you understand the product and business model
Whether the company has stable earnings over time
Whether the company carries high debt relative to earnings, especially when interest rates are high
Whether you can tolerate meaningful short-term swings in value
A useful rule here is: only invest an amount you can watch fall sharply without panic selling.
Diversification in one sentence
Do not put all your eggs in one basket.
This applies at every level: across asset classes, across funds, and across individual companies if you choose to own them.
When to sell, and why long-term tends to win
The hardest part of investing is not buying, it is holding.
Caroline describes market drops as moments that feel urgent, but often correct and recover. She points out a structural change in behaviour: holding periods have shortened from years to weeks and months, largely because investing is now always visible and always accessible.
Her practical approach:
Decide your maximum acceptable loss before you invest
Look at how the investment behaved historically so you are not surprised by normal volatility
Default to a long holding period unless something fundamental changes
Buy and hold over 5 to 15 years is still one of the most reliable strategies for long-term outcomes.
ESG vs impact investing, the difference that matters
Sustainable investing language can be confusing because terms are used interchangeably.
Caroline draws a clear line:
ESG looks at how a company operates: governance, people practices, emissions management, and risk controls. A company can score well on ESG while still operating in a traditionally “unsustainable” sector.
Impact investing focuses on what the company’s products and services do in the world: outcomes for people or planet. The emphasis is on measurable real-world change.
Her view is that ESG was a starting point, and the industry is moving toward outcome-based impact.
Where Caroline sees the next big impact opportunities
Caroline highlights areas that are structural, long-term, and underappreciated:
Energy efficiency, helping homes and businesses do more with less energy
Education platforms expanding access regardless of location
Healthcare innovation
More efficient cooling and refrigeration as temperatures rise
These themes are not short-term trades. They are needs that are likely to grow over decades.
Quickfire takeaways to remember
Investing is not just for professionals, it can be simple and accessible.
Starting matters more than timing the perfect entry point.
A useful personal test is longevity: will this product or service still matter when you retire?
The information shared in this episode is for educational purposes only and does not constitute financial or investment advice. We are not regulated financial advisers. Always do your own research or seek independent advice before making financial decisions. When investing, your capital is at risk.
Resources
Instagram: Impact by Caroline Brady
LinkedIn Caroline Brady
Partner
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