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Diversify, diversify

Source:DFA Australia Ltd

This slide illustrates the importance of diversifying across asset classes. The patchwork table shows from top to bottom the highest returning asset classes each year. The second table shows which asset class each colour represents.
There is no real pattern in the best performing asset classes from year to year. For instance, in the year 2011 Australian Small was the best performer, but one year later it was the worst.
Even within one broad asset class such as Australian equities, the sub asset classes – large, value and small – behave differently from year to year as you can see from the second table.
What’s more, it is not just about picking the best asset class from year to year, but about timing your moves in and out of the best performers. That is an awful lot of decisions to get right.
The only way for an investor to ensure exposure to the highest performing asset classes each year is to incorporate all of them into a portfolio.

Garry Hughes has been the Orewa North accountant for the past 17 years. The key to this long association has been the efficient manner in which Garry has performed his preparation of our accounts. It has been a pleasure to deal with someone whose working relationship has been friendly and exceptionally flexible when fitting in with the school needs and the ever changing Ministry of Education regulations and reporting requirements. It is good to know that sound financial advice and guidance is only a phone call away.
Bruce LawsPrincipalOrewa North Primary School

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