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Enduring lessons from changing markets: Vanguard's 2018 Index Chart

Vanguard | 07 August 2018


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Vanguard released its 17th annual index chart today, providing an important reminder to investors that while markets fluctuate from year to year, patience pays off when it comes to investing.

Against a backdrop of economic, social and political events which influence volatility and shape markets on a daily basis, the chart tracks the growth of $10,000 invested in major asset classes over the course of 30 years.

It shows that since 1988, an investment in the broad Australian share market would have yielded 9.1 per cent and grown to $136,435, while an investment in Australian bonds would have returned 8.0 per cent, growing the $10,000 initial investment to $99,412.

Robin Bowerman, Vanguard’s Head of Corporate Affairs commented “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.

“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.

“The bumpy ride depicted in individual asset classes provides investors with an overview of how market cycles play out over time and how hard it is to pick next year’s winner.

$10,000 invested in 1988*Accumulated investment value at 30 June 2018Percentage 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%
Cash $58,904 6.1%

*Growth of $10,000 with no acquisition costs or taxes and all income reinvested.

Staying the course over the long term requires considerable personal discipline and this is where the value of broad diversification comes into play” Mr Bowerman said.

“We believe that a successful investment strategy starts with an asset allocation suitable for its objective.

“In practice, diversification is a rigorously tested application of common sense–and you can see from the index chart 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.

“In the end, owning a portfolio with at least some exposure to many or all major asset classes ensures the investor of some participation in stronger performing assets while mitigating the impact of weaker assets.” Mr Bowerman concluded.

Over the past 17 years Vanguard’s Index Chart has established a reputation as a valuable educational tool utilised by thousands of advisers and investors across the country.

Visit www.vanguard.com.au/index2018 to view the Vanguard 2018 Index Chart and access the interactive Index Chart tool.