If you have been long banks, health care and Telstra, 2012 has been a great year for equity investors! For example, the health care accumulation index (which includes the income return from dividends) is up almost 50%.
With a bias to the defensive sectors, our high income portfolio has outperformed the market in its first year with a return of 20.2%. With profit and income combined, we turned our original investment of $100,000 into $120,198 over the year, or $122,615 when tax benefits are taken into account.
This is contrary to our expectation – we expected that this portfolio should moderately underperform in a rising market (which it has been), and moderately outperform in a falling market. After all, we constructed it for tax-effective income and are underweight the typical ‘growth’ sectors.