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Disciplined investors defy historic blips

Vanguard | 06 August 2015


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Investment markets naturally react to major events as new information is factored into prices in the short term. Vanguard Australia's 2015 Index Chart shows both the short-term impacts but also the value of investors taking a long-term perspective and riding through times when markets turn down.

The 2015 edition of Vanguard's annual Index Chart analysis, which measures returns across key market indexes over a 30 year period, tracked market moves across Australian shares, international shares, US shares, Australian bonds, listed property and cash. Analysis of Australian shares based on a $10,000 investment in 1985 shows it would have accumulated to $215,685 today, with an average growth of 10.8 per cent per annum.

A key feature the chart, designed to give financial advisers and investors a simple reference point to key indexes' performance, is expanded information about historical events that have had notable impacts on market performance.

Vanguard Australia Head of Market Strategy and Communication, Robin Bowerman
, said the chart demonstrated the value investors could find in resisting the urge to panic during market downturns.

"If you look at milestones on the Vanguard chart like the Black Monday market crash in the 1980s, the Asian economic crisis in the 1990s or the Tech Wreck early last decade you can see short term reactions, but markets as a whole have consistently recovered and continued to grow," Mr Bowerman said.

"The main lesson investors can take away is that choosing good quality, low cost index funds and resisting the urge to move to seemingly safer investments when downturns occur will pay off in the long term.

"Even if another catastrophic global event occurs and hits investor confidence, this analysis shows that, over the long term, major asset classes have rewarded investors for the risk taken with growth. That's why investors should be cautious about letting recent headline events like the Greek economic downturn or reported concerns about the Chinese stock market alter their investment strategy.

"Investors should also be cautious about trying to time market moves. At Vanguard, we are strong proponents of a well-diversified, low cost portfolio. Setting your asset allocation mix is arguably the most important decision we make as investors, and your personal circumstances and ability to withstand market shocks should underpin your allocations."

$10,000 invested in 1985

Accumulated investment value 2015

30 year percentage returns

Australian shares

$215,685

10.8%

International shares

$118,257

8.6%

US shares

$187,872

10.3%

Australian bonds

$145,055

9.3%

Listed property

$149,198

9.4%

Cash

$86,815

7.5%

CPI (to March 2015)

$27,532

3.5%


Vanguard makes an annually updated index performance chart available to financial advisers and individual investors each year. An interactive version is also available online. Although the interactive index chart has traditionally been updated annually, the data will now be updated monthly, to give users the most current index performance information throughout the year.

The Vanguard Index Chart has a long history as an educational resource for advisers to assist clients in demonstrating the long-term performance of key indexes and showing the value of a long-term, diversified investment strategy with indexing at its core.

Vanguard has produced index charts available to the industry for 15 years.

To view the Vanguard 2015 Index Chart online, visit vanguard.com.au/indexchart. To order a hard copy chart or download a PDF version, visit vanguard.com.au/indexchart2015.