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Business school says ‘boring’ investments will beat market

The London Business School says it has discovered a system for beating the stockmarket by investing in “boring” companies with low growth and high yield.

A report from the London Business School in conjunction with ABN AMRO’s Global Investment Returns Yearbook says investors who get involved in high-growth economies and volatile stocks face disappointment over the longer term and are better off investing in less racy econ-omies and companies which guarantee higher dividends.

The report studies investment returns since the turn of the century in stocks, bonds, cash and foreign exchange in 17 major markets, including North America, Asia, Europe and Asia.

It claims that a system of constantly avoiding high GDP growth economies and volatile companies achieves better returns.

Professors Elroy Dimson, Paul Marsh and Mike Staunton say: “Our findings are unambiguous. Investors who allocate assets to countries with high expected GDP growth do not, on average, achieve superior returns. Historically, buying into equity markets with high GDP growth rates has given a return that is below the return of markets with a low GDP growth rate.”

Hargreaves Lansdown head of research Mark Dampier says: “I agree. I think, get it straight into UK equity income. Yes, they are boring, yes, they are high yield but it is very much a case of the tortoise and the hare scenario.

“Some of the big boys always have funds that perform well year in, year out. They are not sexy, not like those funds that just do well for two or three years then drop off. They are generally fairly boring companies but they are far more likely to do well in the longer term.”

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