According to Vanguard’s latest annual index chart, US shares performed best, yielding 10.6 per cent, while cash performed worst with just 6.1 per cent.
However, these figures are only the start of the story, Vanguard head of corporate affairs Robin Bowerman said.
“One of the key lessons of this chart is that taking a long-term perspective and investing in a range of broad market indices gives investors a great chance of investing success,” he said.
“While it is tempting to focus on the top performing asset class, it does not provide much more than an interesting fact about a moment in time as, each year that we review these numbers, the ranking of each asset class varies.”
Mr Bowerman said individual asset classes will have bumpy rides, making it difficult for investors to pick out “next year’s winner”.
Given this, investors are best served by broad diversification for long-term investment.
“We believe that a successful investment strategy starts with an asset allocation suitable for its objective,” he explained.
“In practice, diversification is a rigorously tested application of common sense [given that] markets will often behave differently from each other – sometimes marginally, sometimes greatly – at any given time.
“When you compare the growth in individual asset classes to a long-term investment in a balanced diversified fund (50/50 growth/income split) over a 20-year period, investors can expect a smoother ride thanks to a much more diversified portfolio, while maintaining a good return on investment in the portfolio.”
Okay, I’m ready for the numbers!
$10,000 invested in 1988*
Accumulated investment value at 30 June 2018
|Percentage returns per annum|
|Australian shares ||$136,435 ||9.1% |
|International shares ||$84,798 ||7.4% |
|US shares ||$206,367 ||10.6% |
|Australian bonds ||$99,412 ||8.0% |
|Listed property ||$115,839 ||8.5% |
* Provided there were no acquisition costs or taxes and all income was reinvested.