Market movements in recent times have reinforced the need for portfolio diversification, both within asset classes and by geographic region, said David Bryant head of Australian Unity Investments.
In recent weeks investors with a diversified portfolio and an appropriate investment strategy, would have seen the benefits the discipline of this brings.
“The big losers from the recent equity market volatility would have been investors who have a strong weighting to the Australian equity market, who have not stuck to a long term diversified approach, and who have reacted to the general market nervousness.
“Investors who have maintained a diversified approach and only have a portion of their capital invested in Australian equities would have reduced the impact of any loss.
Mr Bryant said the importance of investing internationally has again been clearly highlighted.
“While there are certainly a number of economic concerns throughout the world, these have been well aired for some time now. Investors should not let this put them off investing outside of Australia as this is where many of the compelling opportunities lie.
“International shares are likely to perform better than Australian shares in the future.
“It is not news that “commodity prices” have been shrinking for a while and that Australian miners are adversely affected. As it is now, resource stocks only represent 14 per cent of the ASX 200, less than half of the 30 per cent it represented in 2008. This percentage has scope to reduce further.
“With the Australian dollar also in long term decline, there is now less risk in international shares than there is in the local market.”
Nevertheless, Mr Bryant also pointed out that a focus on bad news and the market reaction to this has resulted in some of the positive signs for the domestic economy being overlooked.
“While high cost Australian resource producers will continue to feel the pressure, companies in other sectors could do well.
“There is positive news for other sectors, such as the still solid monthly building approvals – even though they are slowing a little they are up 14 per cent on the last year. There is growth in private credit (up 6 per cent); improvement in building loans (up 5 per cent); and an anticipated improvement in retail figures leading up to the Christmas season that could help individual companies do well.
“The Reserve Bank appears to be keeping a close watch on the local economy, adopting a “steady as she goes” approach.
“However, investing only in Australian equities will no longer give investors the returns they need. Those investors with a truly diversified portfolio, both within asset classes and by geographic region, will be the ones who will benefit from positive market movements around the globe.”
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Phone: 03 8682 4401
Australian Unity Investments (AUI) is the funds management arm of financial services, health and retirement living services provider Australian Unity. AUI provides specialist mortgage, property, fixed interest and equity products to investors.
AUI’s investment approach is to use its established in-house expertise in property and mortgages while also forming joint ventures and strategic alliances with other specialist organisations.