How to Beat the Benchmark Twice Over & Rebalance to Fortify your Portfolio
As interest rates climb, value for Blue Chips is coming into its own. That is clear from the performance of our Blue Chip Value Portfolio’s 14.4% a year over the past two years versus the benchmark S&P/ASX 200 Index’s 8.3%.
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Value for Blue Chips means stocks that have the highest expected return. This is based on these companies’ prospective earnings and dividends and how the market is discounting them into the future.
Our team of expert analysts give you our price targets plus our fundamental research on their favourite 40 ASX Blue Chip stocks. Check out our BIG TOP 40 ASX Blue Chips analysis to see what stocks are in and what stocks are out!
As our Blue Chip portfolio continues to nearly double the ASX benchmark, we aim to combine a macro view with our value process. On the one hand, as we have seen this week, interest rates are still going up, while on the other, Blue Chip stocks provide valuable protection against this, bought at the right price. Fast growing Small Caps provide arguably an even more important counter to the destructive consequences of inflation. A combination Blue Chips and Small Caps is what makes for a benchmark beating portfolio in these uncertain times.
Portfolio Rebalance - 5 Ways to Adopt a Defensive Tilt
1.INCREASE DIVERSIFACTION BENEFITS -
To achieve a portfolio with more defensive characteristics - DIVERSIFY.
2. INCLUDE DEFENSIVE STOCKS - choose stocks not only on the basis of Target Opportunity, but also valuable defensive attributes.
3.INCREASE WEIGHT IN DEFENSIVE STOCKS
Do you already have defensive stocks in your arsenal? Look at increasing their weight
4.REDUCE WEIGHT OF DOMESTIC CYCLICALS
Are you invested heavily with domestic stocks that are impacted by macroeconomic factors and fluctuations? Now is the time to reduce your exposure to them.
5.INCREASED WEIGHT IN GLOBAL CYCLICALS To diversify and defend, we suggest looking at global cyclical stocks.
Blue Chip Value is about exploiting the virtues of diversification and stock picking. These companies are able to pay big dividends that will help boost your income. In many cases, however, they are oligopolies and some are monopolies that can pass on increasing costs to customers, which in many cases is us. In order to boost your returns, you also need to employ Small Caps in your arsenal. These are the vehicles that Blue Chips are after too! Just look at the rising takeover activity.
The banking and finance sector is one of the largest markets on the ASX. To learn more about our research on the Banking and Finance Sector, click here.
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