Beta

This part of my portfolio is where I hold traditional long-only mutual funds invested in stocks and bonds, I do modify my exposure to the stock market over the course of the four year stock market cycle. In retrospect I made a mistake though in getting too conservative in 2005 and switching into the CFS Conservative Fund (actually I switched into another fund first - the CFS Diversified Fund) and the CREF Bond Market Fund and out of stock only funds. The Conservative Fund is invested about 30% in stocks and 70% in fixed income and cash. Both stocks and bonds include Australian and global investments. The return has been reasonable - certainly better than switching into cash but I would have been better off to stay in the types of funds in the lower part of the table. Returns on those funds have all been very nice. I first invested in Future Leaders in 1997 and have held ever since. It was my first mutual fund investment in Australia. It's invested in mid-cap Australian firms. Developing Companies is invested in smaller listed Australian firms. I kept holdings in those funds because they are closed to new investors. Maintaining a holding means that I will be allowed to switch back into them at some point. I invested in the Global Resources Fund in 1999 when commodity prices seemed to be at a low. I had to go into my brokers office back then (to get the load rebated). I think she thought I was nuts. This fund is invested in resource stocks all over the world. It biggest holdings are in BHP, Rio Tinto, and CVRD - each composes about 10% of the fund.

At some point I am going to switch out of the more conservative funds to equity only funds. If the yield curve inversion ends , the stock market seems to be going up, and the economy speeding up, I'll drop the bonds. If there is a significant fall in the stock market and a bottom seems to be reached I'll do the same. Maybe I should have switched last summer. The inverted yield curve kept me in all these bonds. Bonds should do well in a recession and the yield curve has usually signalled a coming recession. However, the sample of recessions is too small to assign any statistical significance to the prediction power of the yield curve.