So you decide to invest in an equities fund for the longer term...

So you decide to invest in an equities fund for the longer term say 3 years.

And say you decided to do this 3 years ago on March 1 2018.

And let's take Vanguard high Yield Australian share fund because who does not like high Yield.

Guess how the fund fared over 3 years?

4.99pc , contrast to ASX200 which did 13pc.

The purpose of this illustration is not to have a go at the fund.

The fund has a number of mid to large cap stocks which no one would have imagined performed terribly over the past 3 years

AGL -57pc
AMP -71pc
TWE -38pc
WHC -60pc
WPL -16pc
QBE -32pc
ORG -47pc
IAG -38pc

These are stocks you would never imagined would perform this atrociously over a 3 year timeframe and obviously it is due to inclusion of these stocks in the fund that had caused the funds significant underperformance.

The above demonstrates the fallacy of thinking that stronger blue chips investment for longer term must necessarily produce superior returns. These blue chips have failed shareholders miserably and the only reason the ASx200 has performed better is because they keep recalibrating constituent stocks to include performers and exclude non performers.