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Imagine an investment portfolio – say your superannuation fund – which has a whole bunch of assets heading sideways and one prime asset that is growing strongly. Imagine it is growing so strongly that it lifts the whole portfolio year after year. You would be pretty thankful for that.
The reason why fund managers diversify their investment is to find non-correlating assets – ones that will do well when others do badly. They might even reweight towards that area. They put a high value on such assets.
If the Australian economy is viewed as a portfolio, then its mining industry is the standout performer and saving grace. For that, we are all very lucky, because without it our economic performance would be much worse.
Follow the link to read the rest of this article by Peter Costello, published in The Age.