Property’s volatile ride
Australian residential property outperformed all asset classes for the 10 and 20 years to December 31, 2017, according to the Russell Investments/ASX long-term investing report.
Although at face value residential property is the clear winner, Russell says that a closer look behind the headline numbers shows there’s a lot more variation year on year. For example, while Australian residential property took the top spot in 2001 and 2002, it also came last (below cash and Australian bonds) in 2004 and 2005. Other asset classes including global shares (hedged and unhedged), Australian shares and Australian listed property found themselves in the top spot one year and bottom the next.
This really highlights the mantra that past returns are no guarantee of future performance. Russell Investments’ analysis shows investors generally tend to reduce their likelihood of achieving higher returns by chasing last year’s winners.
Russell says if an Australian investor switched to follow the previous year’s winner each year, they would be 29% worse off compared with staying invested in a sample balanced fund throughout the 20 years to December 31, 2017.