THE RIGHT BALANCE

Go with the evidence when it comes to investing, says FinaMetrica’s Paul Resnik.

“The evidence I can see is that a well-diversified portfolio that has relatively low fees, that has relatively low turnover so it reduces taxation and transaction fees, is likely to give you the most predictable and reasonable return in the long term.

“If the portfolio has taken into account your risk profile, there is little likelihood you will need to change it over your lifetime. Because there is no evidence that says trying to pick the highs and lows of the market adds value.

“Looking at the data, you don’t want to be overly exposed to equities because you have nowhere to rebalance. Whereas if you have a position where you don’t go beyond 75/25, you have a rebalancing capability that is automatic. Equities have boomed, let’s take some profit. Equities have corrected, let’s buy some more.”

In other words, a balanced fund with 75% in growth assets and 25% in cash and fixed interest.