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Identifying top performing assets

WONDERED which asset classes are the best performing class in any one-year period?

Wondered why financial planners keep telling you to diversify your portfolio?

It is interesting to note the variation in returns can be quite phenomenal. (See table left).

A number of interesting conclusions can be drawn from the table.

The international share portfolio is the highest return generator, but it must be remembered that it carries with it a higher volatility.

The purely Australian share portfolio is only marginally better than the listed property portfolio over the 20 years shown.

The period was characterised by a high interest rate era, particularly in the early part of the period.

This caused the fixed interest and cash portfolios to be relatively strong over the timeframe examined.

The most interesting finding is that the diversified portfolio outperformed all the others apart from the international share portfolio with a great deal less volatility.

It is almost impossible to pick which asset class is going to be the best performer. The variation of returns between asset classes is quite startling.

Doesn’t this highlight the need to diversify our portfolios to ensure a good return with a low level of volatility?

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