What will my portfolio contain?
We believe that investment portfolios should be diversified not only across different stock markets but also into commercial property, hedge funds and private equity. Investments will normally be effected through collectives such as investment and unit trusts.
Once funds have been committed to the relevant asset classes, the portfolio will generally remain largely invested. The most important aspect of investment in equities is the dividend, and the ability of a company to increase this at a higher rate than inflation. The expected return on an equities portfolio over the long term can therefore be seen as the dividend yield plus the expected growth rate of dividends. The latter can be represented by the growth rate in nominal GDP (the sum of real growth plus expected inflation).
Cash may be an alternative to fixed income.
