STEPHEN CRANSTON: Diversified portfolio still the ‘smartie’ way to invest
But weighting should still be heavier towards equities, according to Old Mutual Macro-solutions
Most of us think a Smartie box contains candy-covered chocolate buttons. But in investments, each colour represents a different asset class and shows their ranking every year. In 2018 SA equity was the second worst asset class with a negative return of 8.5%; it was also in the bottom two in 2011 and 2015. The Smartie box is meant to indicate how difficult it is to pick the right asset class ahead of time, and how important it is to remain humble and maintain a balanced portfolio. In theory, if you can put money away and do not touch it, it makes sense to ride the equity risk premium. Over 50 years SA equities have produced an annualised return of 15.9%, almost exactly the same as the 15.6% from global equities. But SA investors have only been allowed to invest legally in global equities for the last 24 years. Over 25 years it is SA property that is the best class, with a 13.8% return. Over the past 10 years, SA bonds have only been the top performing asset class once, with a 15.4% r...