KEY POINTS:
Despite a rough year on the markets, returns from the Business Herald Broker picks remain strong when viewed over a five-year period.
First NZ Capital has retained the best record in the competition with total returns for the period of 258 per cent. That's an average return of 30 per cent and a compound return of 29.1 per cent - pretty impressive despite the fact that this year the firm's portfolio delivered only 2.3 per cent gains.
A reminder of the virtues of investing for the long term. An investment of $10,000 with First NZ in the Brokers Picks game back in 2003 - with dividend reinvested - would now be worth $35,797.35.
Of those who've been in the competition for the full five years, Direct Broking is second with a total of 197.4 per cent returns. That's a compound rate of return of 24.4 per cent and an average rate of 27 per cent.
Even ASB Securities - which had the worst performing portfolio in 2007 (-12.9 per cent) - still delivers healthy looking returns when viewed over five years. It now has total returns of 136 per cent - and average return of 20.5 per cent and a compound return of 18.7 per cent. Much better than bank rates and more proof that a long-term view pays off.
Before investors use the Herald survey to choose a broker, they should recognise the results are skewed by important features:
* The figures exclude brokerage fees.
* Brokers are asked to choose the securities that will give the best short-term performance. Had the brokers, for example, been asked to choose for a four- or five-year term, the results might be different.
* The survey does not allow brokers to review choices during the year.
* The survey implies a one-size-fits-all approach. It takes no account of individual circumstances such as an investor's appetite for risk or a requirement for income or special tax circumstances. These are all factors integral to a "buy" recommendation.
* The survey is not exhaustive. Macquarie Equities, UBS and Citigroup are the most obvious omissions. Some have declined to participate.
* Finally, past performance is no guarantee of future performance.
