Chasing performance

I recently went to an economic update roadshow and what stood out was how important it is not to chase performance and make too many switches in asset classes.

The graph below indicates the growth of asset classes over the past 10 years and also a performance chasing portfolio (switching into the best performing asset class of the previous year) vs staying invested in a balanced portfolio like the Investec Opportunity fund.

It is clear to see that if you stayed invested in a balanced portfolio your end result outperforms that of the chasing portfolio by nearly R900 000.

Past performance is not an indicator of future performance. ASISA sectors used as a proxy for asset classes. (Source: Morningstar to 30.06.17)

So although cash outperformed equities over the past 18 months it is clear to see that a well balanced portfolio still trumps that of only one asset class and also a chasing performance portfolio.