Resources may rule the roost but investors who hold onto these limited strategies will eventually suffer, according to Schroder's head of Australian equities Martin Conlon.
Drawing a parallel with the tech crash of 2000, Conlon said that investors should be looking to diversify the type of businesses in their portfolio, despite the resource sector's stellar run.
"We think it is a very sensible time to take a longer-term view and not time to focus on short-term profit and short-term momentum," he told advisers in Sydney yesterday.
Conlon noted that metal and energy commodity prices quadrupled in the last four to five years and stocks with exposure to these underlying communities have almost replicated those returns.
"It is exceedingly unfashionable to be cautious and underweight in that sector. If you are not preaching the word of resources it makes you somewhat of a heretic," Conlon said.
According to Conlon, while the massive price pressure created by demand from the Chinese economy is enticing investors to stay in commodities-related stocks, they could at least move away from the primary commodity sector.
"Even if you do believe in China, maybe you should start exposing yourself to some of the later cycle commodities rather than those used in the early stages of economic development," he said.
"Our philosophy is don't run with the herd."
