The Australia 200 index is up around 7% for 2016. Throw in some dividends and some franking and the "market portfolio" is up 12-13%. So, everyone's a winner, right? Not likely, and the table above points to one of the reasons why. It shows the gain or loss for the index for the sector, not including dividends. It compares this one year return to the previous year, and the same data for the main share market index.
The year past was a tough one for investors. The variation in performance by sectors is enormous, and even higher once we drill down to individual stocks. Picking, say, Tattersalls (TTS) over Crown (CWN), may have been the difference between a good portfolio return and a poor one.
Getting a broad grip on the sectors is a useful step in the investment process. The Materials and Energy sectors were worst performers in 2015, and two of the top performers in 2016. This may have some investors eyeing the Telco sector, given its 12% drop in 2016. Conversely, the Utility and Real Estate sectors were consistent outperformers over the lat two years, and could maintain the momentum. The turn in momentum in Financials may attract positive attention, while the reverse is possibly true of Healthcare.
However it's not just the performance that gives potential clues to winning approaches:In this table we once again see the price return (no dividends) for each sector. Now we add in the return at the high for the year, and the low. Note how even in losing sectors there were points in the year where investors could take profit on any holdings. Similarly, all the the winning sectors where at some stage in the red.
Now have a look at the trading range for each sector. Materials gyrated through a 55% range! In one year! The traditionally "steady" utilities sector moved through a 23% range - still huge.
These two factors point directly to an active investment strategy. The rewards in 2016 went to investors who paid attention and took action on market moves, buying at lows and selling at highs to be ready to buy again. Given a view that volatility is likely to increase again in 2017, active investors are once again at the head of the pack.