Over the 30 years to 30 June 2013, major asset class indices have returned between 8.2 per cent and 11.6 per cent per annum, led by Australian shares, Vanguard’s 2013 Index Chart has found.
Assuming no transaction costs or taxes, and reinvestment of all income, the research reveals that a $10,000 investment in either Australian shares, international shares, US shares, Australian bonds, listed property and cash would have grown to over $100,000 over the 30-year period.
An investment in Australian shares would have reached $268,733, followed by international shares ($129,688) and US shares ($190,702).
Vanguard head of market strategy and communications Robin Bowerman said the results reveal the low cost and effectiveness of indices to capture market returns and balance investor portfolios.
“The significant growth achieved by each of the asset classes presented in the chart also speaks to the benefits of using index and exchange traded funds that track a broad index to capture market returns,” he said.
Bowerman said indexing can help investors avoid many of the risks of market timing and manager and stock selection, with recent Morningstar data revealing that for the 10 years to 30 June 2013, 72 per cent of Australian equity funds and 77 per cent of Australian fixed interest funds either underperformed the index or did not survive.
“The analysis presents no discernable pattern or trend, rather it shows how randomly the leadership, and wooden spoon, shifts among asset classes each year,” Vanguard said.
Patience, discipline and diversifying at an asset class level, as well as within an asset class, are key to helping investors to reap the rewards, Bowerman added.