Imagine devising an investment strategy based on predicting how each country (Developed Market) will perform from one year to the next and the historical returns for the past 20 years were ranked as per the chart below. Each colour represents a different country, and each column is sorted from the highest-performing Country/Market to the lowest. Can you see any discernible pattern to work with?
This article from Dimensional Fund Advisers reminds us that we don’t need to predict which markets are going to be the highest performers and we can improve the reliability of our investment expectations by diversifying across all markets.
Paul Shepherd (CFP® Professional, BEng, DipMgt, DFS[FP], AIF®) is an Authorised Representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
Performance data shown represents past performance or simulated performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
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