Investors could have beaten stockmarket returns over the past five years by investing in just two shares.
New research by The Motley Fool has revealed that since 2004, the FTSE 100 Index has risen by 13 per cent – which equates to an average return of 2.5 per cent each year, but over half of blue chip companies have outperformed the market.
For instance, software company Autonomy has proved to be the FTSE's best-performing share, increasing its value by 900 per cent since October 2004, while by comparison, the top ten performing shares in the FTSE 100 have increased by around 400 per cent in the same period.
Shareholders in the insurer Admiral and household products maker Reckitt Benckiser will also feel pleased, seeing stocks rise by 260 per cent and 120 per cent respectively in the past five years.
The Motley Fool is now suggesting that allocating a small portion of a share portfolio to one or two companies that have beaten the index, coupled with an investment in a stock market index tracker would have delivered better returns than investing in the index alone.
By investing 90 per cent of a portfolio in an index tracker and 10 per cent in one of the top performing shares, The Motley Fool claims investors would have boosted their return from seven per cent to 12 per cent a year.
Commenting, David Kuo, director at The Motley Fool said: "For most people investing in a stock-market index tracker is one of the best ways of getting exposure to shares. However, for a handful, beating the index may be more important than simply matching market returns."
"One way of improving the return without significantly increasing risk is to apportion a small amount of an investment portfolio to one or two judiciously chosen shares alongside an index tracker," he said.
Describing the impact of boosting the long-term return by one per cent a year over 30 years on a lump sum investment of £10,000, Mr Kuo says it "can mean the difference between having £228,000 and £300,000 in the pot".
He added: "You don't need to beat the market by much to be significantly richer. But to do so consistently requires skill rather than luck."
© Fair Investment Company Ltd