Most Australians think of themselves as cautious investors. But new research suggests this supposedly conservative approach may lead investors to taking on far more risk than they realise.
For many Australians, wealth is concentrated in assets that all rise and fall with the same economic forces. The family home, an investment property, a few Aussie shares and superannuation may look diversified on paper, but they can all be heavily exposed to the Australian economy, interest rates and the local property market.
The GXIQ Investor Scorecard 2026 found that Beginner investors (those with lower investment knowledge) were almost three times more likely than Advanced investors to describe themselves as low risk (52% versus 18%). Yet they were also far less likely to diversify across asset classes (22% versus 64%) and countries (8% versus 32%).
In other words, the investors most likely to view themselves as conservative were often the least diversified.
The hidden risk of familiarity
Australians naturally gravitate towards investments they know and understand. Property has long been a preferred wealth-building vehicle, while household-name Australian companies can feel safer than businesses located overseas.
But familiar doesn't always mean lower risk.
A portfolio concentrated in Australian property and Australian shares may still rely heavily on the same drivers: economic growth, interest rates, consumer spending and housing market conditions. If those factors weaken, multiple parts of a portfolio can come under pressure at the same time. Being too risk-averse can sometimes become a risk in itself.
Knowledge changes behaviour
One of the clearest findings from the GXIQ report is that investor knowledge influences investment behaviour.
As knowledge increases, investors are more likely to build diversified portfolios, invest internationally and follow a defined investment strategy.
Advanced investors were nearly three times more likely than Beginners to diversify across different asset classes and four times more likely to diversify across countries and regions.
Rather than avoiding risk altogether, knowledgeable investors appear better equipped to understand and manage it.
Looking beyond Australia
This doesn't mean investors should avoid Australian shares or property. Both can play an important role in long-term wealth creation.
The lesson is simply to understand where risk is concentrated. For investors whose portfolios are largely tied to Australia, broadening exposure across asset classes, industries and regions can help reduce reliance on any single economic outcome.
The GXIQ findings suggest diversification isn't necessarily a function of wealth. It's often a function of knowledge. And for many Australians, improving investment knowledge could be the first step towards building a more resilient portfolio.
Don’t let volatility stand in the way
Understanding the benefits of diversification is one thing, but acting on them when markets are volatile can be much harder. If the prospect of investing in unfamiliar markets or asset classes makes you hesitant, you’re not alone. Fear and anxiety are common during uncertain periods and can lead investors to delay decisions, sell after markets have fallen or wait for the “right” time to invest.
But volatility is a normal and unavoidable part of investing. Rather than trying to predict short-term market movements, investors can focus on what they can control: building a portfolio aligned with their goals and risk tolerance, diversifying across asset classes and regions, and following a disciplined long-term strategy. Investing a fixed amount at regular intervals (also known as Dollar Cost Averaging) can also help reduce the pressure of choosing the perfect time to enter the market.
Taking small, informed steps beyond familiar investments may feel uncomfortable at first. But improving your knowledge and having a clear plan can make uncertainty easier to navigate and help build a portfolio that is better prepared for different market conditions.
Want to test your knowledge?
Take the 15-question GXIQ Investor Knowledge Quiz to test your understanding of investing fundamentals and discover your GXIQ score.
The information contained in this quiz is provided for general information and educational purposes only. It does not consider your personal objectives, financial situation or needs, and should not be used to make investment decisions.
Quiz results are indicative only and are not a measure of expected investment outcomes or suitability for any financial product.
Consider whether any investment is appropriate for your circumstances, obtain advice and read the relevant PDS or TMD before making an investment decision.
