By MoneyMorning.com.au
What if everything you thought you knew about investing turned out to be wrong?
What if your diversified investments of portfolio stocks won’t give you the best growth over the long term?
What if a house isn’t… as safe as houses?
And what if holding 100% of your assets in gold and/or silver (the “crazy Midas” investment approach as our old pal Dan Denning calls it) won’t give you complete protection when the financial system finally collapses?
When things go bad, everything will go bad. It’s just some investments will be worse than others. So you’ve got to position yourself to make sure your investments aren’t in the “worse” basket…
Yesterday we looked at the table of returns from Super Ratings:
The best performing investment asset class of the past 10 years is the Australian Share Index. It has returned an average 6.98% per year.
That’s OK.
Trouble is, if you look at the chart below, it’s easy to see that the best days for stock market returns could be behind you:
And as each month passes since mid-2009 without stock market gain, the impact of the 2003-2007 bull market recedes.
Then there’s housing. According to the official numbers from the Australian Bureau of Statistics (ABS), house prices in the eight Australian capital cities have averaged an 8.73% annual gain since 2002.
That’s pretty good. But that’s the gross number. When you consider most home buyers can only afford to buy a house with a mortgage, the net return is much less.
Then there’s our old friend, gold…
Since 2001 it has made an average annual gain of 19.1%.
That’s the best of the bunch.
Of course, only a tiny number of Aussie investors will have gotten the benefit of that gain. Because most investors have been brainwashed into thinking shares and housing are the best places to put your cash… rather than gold.
Now, that’s just a snapshot over a relatively short period of time – nine or 10 years. And who’s to say gold will be the best asset over the next 10 years? Maybe it will. But maybe it won’t.
The Case for Diversified Investments
The point we’re making is this: the mainstream view is that diversified investments across many investments within an asset class and across different asset classes, is the best way to create wealth.
In fact the opposite is the case.
Sure. If you’re lazy… Or you just don’t care… Or you figure the government will pay you a wage in retirement, then go ahead, diversify.
But if you want to build genuine wealth, your best shot is to weight your investments towards the asset class that offers the best chance of making the best future return.
Sounds easy right? If only it were that easy. Trying to pick the best performing asset is hard. If you believe the guys at the Gold Symposium, the best place to stick your cash is gold and silver.
If you believe the mainstream commentators, they’ll tell you the stock market is the best place to invest. Because, they say, historically it always has been (even though it hasn’t, but they forget that).
The same goes for the property spruikers. If you believe them then it’s always the right time to buy property because house prices double every 7-10 years… except they don’t.
So, where should you invest your money if it’s not in diversified investments?
While it’s hard to pick the right asset class, setting your portfolio to benefit from it isn’t. And it’s something you can act on right away.
We’ll explain all tomorrow… including the unusual inspiration behind this simple yet rarely followed investing approach.
Cheers.
Kris.
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From the Archives…
The Onward March of the State
2011-11-11 – Kris Sayce
Lose a Shirt, But Gain a Wardrobe
2011-11-10 – Kris Sayce
Neither a Borrower Nor a Seller Be…
2011-11-09 – Kris Sayce
Roman or Zimbabwean
2011-11-08 – Kris Sayce
Lighting a Match to Inflation
2011-11-07 – Kris Sayce
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