Hello and welcome to this month's edition of Investment Insights.
This month we look back at some bold predictions made by stock analysts in the Australian Financial Review some five years ago. The article was titled "Ten Stocks for Ten Years" and interviewed analysts who suggested ten stocks that investors should invest in for the next decade. In this piece from Jim Parker at Dimensional he takes a look at how these stocks have performed at the halfway mark... without ruining the surprise for you, the results are not what you would expect! There are two points which make this article relevant; number one being diversification and that investing into ten stocks in the Australian market does not equal diversified, and secondly, that very few people (other than Mr Parker), would have gone back to look at the performance of these predictions.
Daniel Minihan, our Director of Wealth Management, has recently written on this very topic, taking a closer look at the change of the top stocks in the S&P500. With the U.S. market recently topping 2,000 points for the first time in history, Daniel's piece explores the composition of the top ten when it was at 1,000 points. This highlights the risks of having a small and highly concentrated portfolio, which at face value may seem safe, but in reality is highly risky. To have a look at Daniel's article, please click here. On the topic of diversification, it seems important to mention that rebalancing should be undertaken at least once a year. In this article (and accompanying audio) from the Wall Street Journal, Jonathan Clements provides three reasons why you should rebalance your portfolio annually.
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