UK Telegraph: Sometimes Boring Investing Beats Exciting Investing

Friday, 21 Dec 2012 10:54 AM

By Michael Kling

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Sometimes boring beats exciting.

Investors who tracked the main index of Chinese stock markets have not made a cent in two decades, notes Ian Cowie in The Telegraph.

If you had put money into the Morgan Stanley Countries Index (MSCI) China index in 1992, you would now have about what you had initially put in, Martin Gilbert, chief executive of Aberdeen Asset Management, told The Telegraph.

Editor's Note: How to Pay Zero Taxes . . . Legally

“The plethora of attractive statistics associated with some economies does not always translate into stock market performance," Gilbert told Cowie.

On the other hand, Aberdeen Emerging Markets returned 75 percent during the last five years and 21 percent this year, backing the claim that active stock picking beats index funds, according to the paper.

The traditional, yet boring, strategy of seeking dividends and diversification also seems to be better than pursing exciting gains is. The FTSE 100 index, which tracks Britain's largest companies, fell almost 9 percent for the last five years, but investors gained 10 percent after counting dividends, The Telegraph reports, citing Cazenove Capital Management CEO Andrew Ross.

The Cazenove Diversity fund had a total return of 22 percent over the last five years, while the FTSE 500 fell by over 500 points, Ross boasts. "A balanced approach has served investors well during the difficult period we are living through."

China's slowing economy did indeed provide investors challenges in 2011 and 2012, according to MarketWatch. Still, the potential for large, if volatile, returns will probably continue to attract emerging-market investors.

But investors will have to get into other countries besides the BRICs (Brazil, Russia, India and China) if they want strong returns next year.

Turkey, Thailand, Mexico and Hong Kong were some top performers this year, MarketWatch reports, citing data from iShares MSCI exchange-traded funds. As a group, BRICs underperformed this year, Mark Williams, a Boston University risk management expert, tells MarketWatch.

Editor's Note: How to Pay Zero Taxes . . . Legally

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