The Great Asset Class Race
As investors we are faced with uncertain outcomes, however, we invest with the view that over the long term our choices will be rewarded. The graphic below illustrates the accumulative value of $10,000 invested across a range of asset classes from 2009 to 2019. The return of any investment should be commensurate of the risk associated with it and for the most part, the graphic below supports this. The returns for low-risk assets such as Cash and Fixed Income have been relatively stable whereas returns from Equity Markets have been much more variable.
A question that investors should ask themselves before finalising a portfolio is; “Could I sustain potential short-term losses for long-term gains?” The ability to identify where you stand is the first step to building a diversified portfolio with a mixture of assets, weighted towards a risk level within your comfort zone.
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Key:
EM Equities – Emerging Markets Equities; MSCI Emerging Markets A$ Unhedged
A-REITs – Australian Real Estate Investment Trusts; S&P/ASX 200 A-REIT
Gbl High Yield – Global High Yield Bonds; Barclays Global High Yied Index A$ Hedged Index
Aust Equities – Australian Equities; S&P/ASX 200
Int FI – International Fixed Income; Barclays Global Aggregate A$ Hedged
Aust Credit – Australian Credit Markets; Bloomberg AusBond Composite 0+ Year Index
Aust FI – Australian Fixed Income; Bloomberg AusBond Composite 0+ Year Index
Gbl Equities – Global Equities Markets; MSCI World ex Australia A$ Unhedged
Cash – Cash Rate on Bank Bills; Bloomberg AusBond Bank Bill Index
Inflation – Consumer Price Index Inflation Rate; ABS Consumer Price Index