Many investors are wedded to the idea of investing in blue chip shares. They are drawn to the perceived safety and solid dividends. Over the last 12 months, this belief has been shaken with first the big Australian BHP Billiton Limited (ASX:BHP) slashing its dividend, then the almost unthinkable event of one of the big four banks Australia and New Zealand Banking Group (ASX:ANZ) actually cutting its dividend.

First let me say, I am not advocating completely dumping blue-chip shares.

They should definitely form part of a diversified portfolio, but the facts are that the largest 20 companies account for around 60% of the stock market’s total value. This means on average that 60% of investments held by Australian investors are in the big banks and big miners. This on its own creates the risk of over exposure to a particular sector and it also means that investors are under exposed to growing sectors such as healthcare.

With bank interest rates falling, more investors will be looking to equities to provide both growth and yield. With the S&P/ASX 100 actually going backwards over the last financial year, you might expect me to suggest some small caps for growth, but surprisingly investors do not need to look that far from their comfort zone.

In fact some of the best performers have been shares just outside of the S&P/ASX 50, such as Domino’s Pizza Enterprises Ltd. (ASX:DMP) up 95%, and Treasury Wine Estates Ltd  (ASX:TWE) up 105% over the last 11 months.

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Source. http://www.asx.com.au/products/index-charts.htm

This financial year the S&P/ASX MIDCAP50 has risen over 13%, while the S&P/ASX 100 and the S&P/ASX 50 have fallen by 3% and 5%.

To clarify, the S&P/ASX MIDCAP50 is composed of shares ranked from 51-100 in size by market capitalisation. They currently range in size from $ 1.5 billion to $7 billion and they come from over 30 subsectors on the ASX.

What this means in plain speak for investors is that no one company or sector dominates the index such as the financial sector does in the S&P/ASX 20.

Foolish takeaway 

With interest rates looking likely to decline even further, it is important for investors new or old to consider what the best approach for their particular circumstance is. Rather than simply investing in traditional blue chip shares, it may be wise to consider if that approach is still as relevant as it once was.

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Motley Fool contributor Alan Edmunds owns shares of Australia & New Zealand Banking Group Limited and Domino's Pizza Enterprises Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.