A sluggish Australian economy and the likely impact of changes in China's economy means share market investors will need to remain patient, an investment firm says.
Australian Foundation Investment Company, which has a market portfolio worth more than $6 billion, said short term returns have been very volatile over the last year, but investors can still build wealth if they hang in for the long term.
The company's own portfolio delivered a negative return of 2.5 per cent in the year to September.
Despite current economic conditions, a falling Australian dollar and a prolonged period of low interest rates could assist the market, the company told shareholders at its annual general meeting.
Recent declines have also brought stock valuations back to more reasonable levels, it said.
AFIC believes its portfolio remains well positioned, but has responded to recent volatility by adding to its holdings in small and mid-sized companies.
That included boosting its investments in James Hardie, SEEK and Sims Metal Management, and adding stakes in Macquarie Group, Challenger and Freedom Foods.
AFIC's exposure to banks, energy stocks and supermarkets has also been marginally reduced.
At September 30, its top 10 holdings - which represent more than 51 per cent of its portfolio - included each of the big four banks, BHP Billiton, Rio Tinto, Telstra, retail giant Wesfarmers, toll road owner Transurban and packaging company Amcor.
AFIC shares gained three cents to $5.71.
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