“Hey, have you seen what AI stocks have been doing lately?”

In a world full of spruikers promoting yesterday’s heroes, it’s easy to fall for one of the biggest mistakes in investing.

Whether it’s technology or banks or gold, one sector or another will always be burning bright. But that doesn’t mean those stars will keep shining.

This chart shows how different asset classes have performed each year over the past decade. If you can see a pattern here, you’ve got better eyes than we have!

Past performance is not an indicator of future performance

Which segment will be the next chart-topper? The truth is nobody knows and if someone tells you they have unlocked the secrets to picking tomorrow’s winners, run a mile.

Betting on last year’s stock market winners is like driving your car via the rear-view mirror. It’s a good way to run into a ditch.

So, what’s the alternative? A professional adviser putting your interests first will tell you the only way of investing in tomorrow’s top sectors is to own a little bit of all of them.

This process is called diversification. It means that instead of relying on a single investment to deliver the desired outcome, you spread your portfolio far and wide.

Diversification doesn’t eliminate risks. But it does help you avoid taking unnecessary ones. It also helps make for a smoother ride and more reliable outcomes.

The bottom line is you don’t need to predict tomorrow’s heroes. You just need an adviser to build you a strategy that prepares you for whatever might come next.