Time in market more beneficial than market timing
Some $10,000 invested in Australian shares 30 years ago would have grown to more than $130,000 this year, second only to US shares, according to Vanguard.
The firm tracked 30 years performance of major asset classes and found Australian shares would have yielded 8.9% per annum. By 30 June 2020, the total assets would have grown to $130,457.
If the person had invested $10,000 in Australian bonds, these would have generated a 7.7% annual yield and grown to $93,454.
The growth of Australian equities was the second-best performing asset behind US equities which had annual yields of 10.3% and would have grown to $186,799 over the 30 years.
The table demonstrated the power of investing as if the asset had only been held in cash, it would have grown to just $44,172.
Vanguard said the 30-year period had been “bookended by two recessions”, one in 1990-1993 and the recession this year caused by the COVID-19 pandemic.
|
$10,000 invested in 1990* |
Accumulated investment value at 30 June 2020 |
% returns per annum |
|
Australian shares |
$130,457 |
8.9% |
|
International shares |
$82,969 |
7.3% |
|
US shares |
$186,799 |
10.3% |
|
Australian bonds |
$93,545 |
7.7% |
|
Listed property |
$95,395 |
7.8% |
|
Cash |
$44,172 |
5.1% |
*Growth of $10,000 with no acquisition costs or taxes and all income reinvested.
Robin Bowerman, head of corporate affairs at Vanguard, said: “There’s a wealth of research to show that time in the markets benefits most investors more than market timing, largely because market timing is incredibly challenging. The best and worst days often happen close to one another and in many cases, timing the market for re-entry simply results in selling low and buying high.
“It can be hard to tune out daily market noise – particularly when it is being driven by a global pandemic – and procrastination is a natural result for those at the start of their investing journey.”
AUTHOR
Laura Dew
Recommended for you
There is one specific risk that is a significantly higher concern for financial services directors compared to companies overall and is impacting their risk appetite, according to the AICD.
Global fund managers are shunning bonds, with the asset class seeing the largest drop in allocations in more than 20 years.
Australian Ethical has seen its funds under management reach $10 billion, driven by organic customer growth and superannuation contributions.
Financial advisers will have access to private equity investments run by WTW for the first time as it launches a pooled fund to provide savers with access to traditionally institutional assets.
