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Broad diversification captures benefits of evolving markets

Vanguard | 04 September 2017


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Investment markets have evolved over time as the fortunes of individual companies, sectors and regions rise and fall, however Vanguard Australia's 2017 Index Chart shows that broad diversification, a long-term perspective and discipline deliver investors the rewards of long-term markets growth.

Vanguard's annual Index Chart, which plots returns across key asset classes, shows persistent growth amid a shifting landscape across Australian shares, international shares, US shares, Australian bonds, listed property and cash.

The 2017 chart demonstrates the growth of a $10,000 investment in each asset class made in 1987, showing the 30 year accumulated returns across key indices.

Vanguard Australia Head of Market Strategy, Robin Bowerman, said that the index chart made a strong case for diversification, not only as a means to reduce market risk, but also to harness the long-term growth of evolving financial markets, as growth industries form a larger slice of their respective markets.

“While the majority of Australia's 10 largest listed companies have corporate history stretching back over a century, 50 per cent of the top US companies are much newer technology businesses, highlighting the vast difference between regional markets,” Mr Bowerman said.

“Having a diverse portfolio that captures market changes as they occur increases individual's chances of long-term investment success.

“Investors should think of their portfolios in terms of hundreds, or even thousands of companies across the globe, rather than being limited to a handful of companies in the local market.

“With a time period spanning eight Australian Prime Ministers and countless financial market events the chart serves as a visual reminder of the fundamental role diversification and discipline play over time and through varying market conditions, these are principles that apply to both active and index investments.”

This is the seventeenth year Vanguard has produced and distributed the index chart, with each edition tracking the performance of major asset class indices over 30 years.

The chart has a long history as an educational resource that advisers use to assist clients in demonstrating the long-term performance of key indices and showing the value of a long term, diversified investment strategy.

An interactive version of the index chart allows visitors to the Vanguard website to plot specific time periods and asset classes; it can be accessed online at https://www.vanguardinvestments.com.au/adviser/adv/v/indexchart2017.jsp