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Buy & Hold Australian Blue Chip Stocks – Are you Crazy?

worldWhat’s the best way to get some growth from your portfolio?

So often we hear people say that you should buy a few Australian Blue Chip stocks and hold them long term…  Well they’ve got it wrong!

Now I’m not saying a ‘buy and hold’ strategy is necessarily bad.  In fact, the way people will get their wealth is by saving and investing.  But that’s another story.  Here I want to challenge the traditional stockbroking strategy of ‘buying a few Aussie shares’.

Investors (and their stock brokers) tend to feel more comfortable investing in shares with which they are familiar.  That is, Australian shares that are often household names like the big banks, big retailers and big mining companies.

However, people forget that the Australian share market makes up only around 3% of the worlds shares.  That’s right… only 3%!  And yet they hold all their growth investments in one market, often in a handful of stocks dominated by a couple of sectors.  What this represents is a highly concentrated investment portfolio with a high level of risk.  Risk that is usually unrewarded.

So what’s the alternative I hear you ask?

A more prudent approach is to make sure that your portfolio has exposure to different shares in a variety of markets around the world.  This can be done without taking additional risk because you’re no longer holding ‘all your eggs in one basket’.

There are some years in which Australian shares perform better than the share markets of many other countries around the world.  But more often than not it helps to have exposure to shares globally.  Have a look at the table below.

2013 country returns
























Now this is, of course, just one year.  But it illustrates the fact that limiting one’s investments to a portfolio of Australian shares usually results in sub-optimum returns.  But as I said earlier, where do most Australians and most Australian stockbrokers invest?  Australian shares.

It may also come as a surprise that the unfamiliar International Shares, may not be so unfamiliar!  A global portfolio will often include names such as HSBC, Exxon Mobil, Apple, Coca Cola, Microsoft, Walt Disney, Volvo and Samsung to name a few.  Heard of them?  In fact, you have probably used their products in the last week.

So if you look at your investment portfolio and all you see is a group of Australian company names, perhaps it’s time to enhance your investments by broadening your exposure to the globalised world we now live in.


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