It's so ridiculously easy that the newest investor could have done it, so blindingly obvious in hindsight that we remain dumbfounded that we didn't think of it, yet so hard to execute in practice that few Australians pulled it off.
There's no fancy alpha, beta, or timing strategies, nor do investors need a working knowledge of the derivatives market to make this strategy work, yet so few thought of it or executed it successfully. What was the easiest way to beat the market in 2015?
What the secret?
The secret to easily outperforming the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) this year has simply been this; hold your Australian and international industrial stocks, and sell all your banks and resources stocks.
A quick look a price chart of most of Australia's major banks and resources companies makes the above statement blindingly obvious. The S&P/ASX 200 is down 4% in 2015 so far, however some of Australia's largest and most widely held companies are entirely responsible for the country's poor performance.
Avoid These
Here's a list of giant companies that avoiding would have nearly guaranteed a successful investing year:
- National Australia Bank Ltd. (ASX: NAB) – down 15%
- Commonwealth Bank of Australia (ASX: CBA) – down 11.5%
- BHP Billiton Limited (ASX: BHP) – down 21%
- Rio Tinto Limited (ASX: RIO) – down 13.5%
- Woodside Petroleum Limited (ASX: WPL) – down 19%
Hold These
If you needed further proof that investors should retain international and healthcare exposure, here are the list of major ASX companies you should have retained:
- Amcor Limited (ASX: AMC) – down 1.9%
- Macquarie Group Ltd (ASX: MQG) – up 41%
- Ramsay Health Care Limited (ASX: RHC) – up 9%
- CSL Limited (ASX: CSL) – up 9%
- Domino's Pizza Enterprises Ltd (ASX: DMP) – up 87%
Foolish Takeaway
For all the talk about the dividend yield of the big four banks and mining companies, the fact remains that you have gone backwards this year by holding them. As always, there are individual circumstances that make it difficult to radically change your portfolio each year, but doing so can clearly have a big impact on your wealth- if you pick the correct strategy.
