Stock-picking over Indexing

I am (and have been) positioning portfolios for rising inflation.

Because of this view, I think certain sectors will perform better than others (see sector rotation) and as a function of my business, my focus is picking the better companies to be invested in.

This is dominated by placing an emphasis on the ‘risk’ part of an attractive risk/reward opportunity.

In other words, try to take the least possible risk while seeking an adequate return and picking the stocks with tailwinds should take care of the rest.

In turn, due to many reasons (including a large overweight to technology), I think broad-based index tracking ETF’s (and the indices themselves) will be poor performers in the coming years.

It’ll be evident which money managers are index huggers.

I’m not being dangerous nor a maverick but I can’t help observe that in the asset management industry, all that a fund manager needs to do is, make sure their performance is similar and close to the rest of the sheep.

It’s safer staying with the flock…..you get to keep your job, retain assets and keep the gravy train chugging along.

I dare to say, that diversification certainly helps you achieve one common thing…….it’s that you are able to lose less money than others.

July 29, 2021

by Rob Zdravevski

rob@karriasset.com.au