The worst reason in the world to buy something is because somebody else did. This is essentially what you would be doing if you allowed your portfolio to mimic the benchmark index. A company’s weighting in the index tells you only what has happened in the past, not what will happen in the future. Furthermore, there is a lot of rubbish in most benchmarks that with a little hard work can be avoided. Successful investing requires thinking differently. This may at times feel uncomfortable but you should learn to embrace the feeling as a sign you’re on the right track. To put it in the simplest terms, to beat the benchmark you must deviate from it.
Hugh Young is managing director at Aberdeen Asset Management Asia.