Markets have been having a pretty good run again this year with many major indices recording gains of 10-20% so far.
This is fantastic news if you're invested in those markets because the returns are much better than bank interest.
Despite those healthy returns, the reality is a rising tide doesn't lift all boats (even some of the harbour's most impressive boats).
There have still been many companies around the world under-performing against the market.
Computer giant IBM is one. Valued at around $200 billion, IBM has had a lacklustre year, down 6.5%, while it's benchmark, the Dow Jones Industrial Average is up over 19%.
Caterpillar is another example of a large, well known company dragging against the Dow Jones, it is down over 10% this year.
Across the border in Canada, you can see the benefit of diversifying beyond just one country as the Toronto Stock Exchange (TSX) lags US markets with a 7.3% return for the year. The TSX is home to the world's largest gold miners, Goldcorp and Barrick Gold, who have both lost around 50% of their value this year and combined with oil companies, form part of the reason the TSX is lagging.
It is a similar story back here in Australia. Gold miner Newcrest has fallen 60% while it's benchmark the ASX 50 is up 15%. Other notable companies diverging from the index are Worley Parsons, down 8% (pre a 25% fall last week), Orica, down 7%, and Coca Cola down 8.5%.
This proves that a portfolio full of good looking companies in good times can still give bad looking returns. Real diversification comprises a variety of different funds full of hundreds of companies from Australia and around the world.
If you would like to discuss your own diversification and investment options in detail, please contact Dominique Schuh on 07 5480 4877 or at email@example.com