Balance the Key to 2007

According to Morningstar head of research Anthony Serhan. Folk will need to be focused on the quality and mix of investments in 2007, following three years of exceptional returns,

“2007 will be a very important year for financial planners and their clients. After three great years of equity (share) market returns now is the time to be considering the ups and downs of these markets and making sure they are in the right risk profile”.  Equally important will be making sure that portfolios still have the right mix after the strong run up in equities.

“At the asset allocation level this means rebalancing from some of the stronger sectors. According to Serhan; ‘the central tenant of diversification is that not all investments will be moving in the same direction’.

Another strong theme at this time is quality of earnings. While it is tempting to chase even higher returns in a surging market we think it is important to look through the hype and stay focused on investments with quality earnings profiles.

This applies to equities and fixed interest markets. Particularly in bond markets, where long interest rates have fallen, there are a number of risks present as pressure on interest rates rises.

Original Article published January 2007