Australian funds manager Vanguard has released its annual index chart tracking the performance of major asset classes over the past 30 years.
The chart shows what $10,000 would be worth now if it was invested 30 years ago and demonstrates how investors can benefit from capturing market returns when they are prepared to invest in a disciplined way over the long-term.
The Vanguard 2014 Index Chart plots the performance of each asset class with an initial $10,000 investment in Australian shares, international shares, US shares, Australian bonds, listed property and cash.
The research shows that a $10,000 investment in any one of the asset classes would have grown substantially in value over the 30-year period.
The Australian shares investment would have reached a value of $278,615, a return of 11.7% a year.
Robin Bowerman, head of market strategy and communications at Vanguard, says that at any point in time global political and market events can create a lot of market noise.
He says this is where a clear long-term plan can help investors maintain a disciplined investment strategy, and avoid responding to short-term emotional influences.
The data shows that the highest and lowest yielding asset class randomly varies from year-to-year, underscoring the risks associated with attempts to time the market.
“Investors are often tempted to try and time the market, yet they can be caught out making decisions based on the past year’s best and worst performers,” Bowerman says.
“For example, if investors moved out of international shares in 2012 following two years of low returns they would have missed out on the 33.1% and 20.4% return in 2013 and 2014.
“The challenge for investors is to look beyond the headline performance of shares and instead build a portfolio for all-seasons based on the right mix assets that matches your personal risk tolerance, harnesses the power of diversification and helps you remain disciplined, so you can reap the benefits in the long run.”
This is the fourteenth year Vanguard has produced the index chart, with each edition tracking the performance of major asset class indices across the 30 preceding years.
The calculations do not account for transaction costs or taxes and assume the reinvestment of all income. The chart plots the rises and falls for each of the asset classes over the long-term, and reflects the balance as at June 30, 2014.
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