Prop­erty’s volatile ride

Money Magazine Australia - - INVESTING | IN BRIEF -

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.

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