SMSFundamentals | Jan 17 2013
Download related file: assetreturns_1301
– Asset diversification proved superior over cash in 2012
– Cash investments returned only 4%
– A-REITS make strongest returns
– Shares tip bonds from top spot
By Eva Brocklehurst
Global asset manager Russell has grabbed the opportunity to highlight the virtues of a well-diversified investment portfolio across multiple assets. Russell points out those investors playing safe and holding cash-only assets over 2012 have missed a serious windfall as other assets generated much higher returns over the year.
Australian Real Estate Investment Trusts (A-REITs), for example, achieved a 32.8% return in 2012, making up for losses in previous years. However, long term perspectives in Russell's 2013 risk versus return analysis – which charts annual returns of various asset classes over three decades – shows significant differences among classes year to year and over the long-term.
Despite short-term volatility emanating from concern about Europe, the US fiscal cliff negotiations and a Chinese slowdown, most asset classes returned at least high single digit if not double digit returns in 2012. Russell says Australian equities and global shares (hedged) delivered nearly 20% and global shares (unhedged) delivered 14.7%. This has tipped the 2011 performance winners – Australian and international bonds – from top spot. Nevertheless, bonds returned solid results, with Australian bonds at 7.7% and international bonds at 9.7%.
Playing safe, by sitting on the investment sidelines in cash during 2012, meant returning just 4%.
"The risk-on, risk-off volatility is likely to continue in the foreseeable future and the risk versus return analysis demonstrates the value of diversification, particularly in this environment," says Russell's director of client investment strategies, Scott Fletcher. "The results of the analysis continue to support our belief that a well-diversified, multi-asset portfolio which adapts to a changing environment, is the best way to more consistently achieve investors' goals."
Below is an overview of relative asset performances since 1993 (overview provided by Russell). Investors curious about actual asset performances each year can download a table provided by Russell going back to 1981 (see link at top of this story).
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