News Releases
| What: | Investors who subscribe to a buy and hold investment strategy may be in for a rude awakening if they maintain a hands-off approach to their mutual funds, says Ranga Chand, one of Canada's leading mutual fund experts. While investing for the long-term rather than timing the market remains a sound strategy for successful investing, investors could be creating a false sense of investment security if they neglect to also appropriately diversify their portfolios. |
| Why: | Conventional investment wisdom suggests that a buy and hold strategy provides a solid rate of return over the long term – despite periods of market volatility or decline. However, according to Chand, investors who are not diversifying their mutual fund portfolios by asset class have a greater likelihood of negative returns, even if they are investing for the long-term. For example, during the December 1998 to December 2006 time frame, a period which covers thirty-seven separate 5-year holding periods, the average U.S. equity fund delivered negative returns 100 per cent of the time - bad news for those investors who were following a ‘buy & hold' investment strategy focusing primarily on the U.S. market. Conversely, investors who had held a diversified portfolio over the same time period would have fared much better. For example, the average Canadian Balanced Fund posted positive returns over all 5-year holding periods 100 per cent of the time. Similarly, Chand's Heavy Hitter Select Model Portfolios, available exclusively at BMO InvestorLine, also would have generated positive returns over the same time frame. For example, Chand's Heavy Hitter Select Model Portfolio for Balanced Income and Limited Growth posted positive returns over all thirty-seven 5-year holding periods. The model portfolios' average annual return over all of the 5-year holding periods was 9.8 per cent, ranging from a high of 11.1 per cent to a low of 8.7 per cent. |
| Who: | Ranga Chand is internationally recognized as one of Canada's leading economists and mutual fund analysts. He has published extensively in the field of economics, and is the author of several books on mutual funds, including Ranga Chand's World of Mutual Funds and Ranga Chand's Getting Started with Mutual Funds. As a strong proponent of diversified portfolios, Chand has partnered with BMO InvestorLine to provide a range of mutual fund portfolios that take the guess work out of diversification. Each of Chand's model portfolios are a pre-selected mix of investments that fit with an investor's risk tolerance and investment objectives in order to maximize returns and minimize risk. Model Portfolios provide instant diversification and simplify the selection process for long-term oriented online investors.
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