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<\/a><\/p>\nGraph 1: Top 5 best and worst performing SA General Equity unit trust funds for 2016 (source: PSG Old Oak & Financial Express)<\/i><\/p>\n
The story of the duck and the scorpion illustrates how we as humans tend to act a certain way, even if it\u2019s not in our best interest, said Schalk Louw, portfolio manager at PSG Wealth Old Oak. The duck hesitantly offered to help the scorpion to safety after he got stranded in a flood.<\/p>\n
Shortly before reaching the shore, however, the scorpion stung the duck, which eventually lead to the death of both of them. Although the scorpion knew that his actions would kill them both, he simply found it too difficult not to give in to his natural instincts.<\/p>\n
Investment figures published monthly for both shares and unit trusts can easily place investors in the scorpion\u2019s position. It\u2019s in our nature to want to choose last year\u2019s winners for our future portfolio, but historically, it\u2019s been proven that this could land you in very deep waters.<\/p>\n
Let\u2019s use local unit trusts as an example. Investors can easily be persuaded to limit their research to funds that performed the best in the previous year, but in my opinion, this may hold more poison than the scorpion\u2019s stinger.<\/p>\n
If you were lucky enough to be invested in last year\u2019s five best performing General Equity unit trust funds, your investment would have grown by an average of 36% during a time when SA General Equity unit trust funds grew by just over 3% in total over the same period, while the FTSE\/JSE All Share Index grew by a mere 2.6%.<\/p>\n
Most of the top five funds mainly included resource-based exposure, but it still shows that it was possible to achieve excellent growth for those who were willing to take the risk, in a relatively difficult investment environment.<\/p>\n
The five weakest- performing unit trust funds would have treated you much worse, as you would have lost more than 10% of your capital. True to our nature, most investors would have chosen the top five best performers of the previous year at the beginning of this year, simply because they delivered amazing returns in 2016.<\/p>\n
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