September quarter 2012
It’s been a good quarter and year for our members who’ve maintained a long-term focus. Australian shares returned just shy of 15% over the year and international shares were approximately 13.6%.
The table below shows how the various asset classes fared over multiple time periods.
|Asset Class||Quarter||1 year||3 years||10 years|
Source: Heuristics October Investment Bulletin
The global and Australian economies have weakened over the past year as the problems in Europe and the slowdown in China dampen economic growth. The Reserve Bank of Australia and other central banks have reacted to this by lowering interest rates and therefore trying to make rates as low as possible to act as a stimulant to economic growth and longer-term asset classes. This has worked quite well for shares and corporate bond markets but the jury is still out in terms of overall business activity.
We continue to factor in an economic environment that’s subdued and where markets will continue to trade with volatility in the short term.
Despite the patchy growth, shares still contain good prospective performance compared to bonds or cash. The chart below shows the dividend yield on offer for Australian shares compared to the coupon on Australian 10 year bonds.
International shares offer better value over Australian shares with an overpriced Australian dollar purchasing various international assets at better valuations than comparable Australian companies.
Over the past two years we have been talking about the benefits of a longer-term commitment towards investing. This still stands although the markets today are not as compelling as that on offer 12 months ago. Nonetheless, we continue to believe that a well diversified portfolio containing all the asset classes is the best way to achieve long-term investment goals which are real returns after inflation. For those with a capital preservation focus, cash and options with lower allocations to shares and infrastructure, such as Conservative options, are preferred to fixed income.
We remain convinced that the best way members can attain real returns over the next five to seven years is to maintain well diversified portfolios with an exposure to all asset classes.
The information provided above is of a general nature. It does not consider your specific needs nor is it intended to be financial product advice. You should obtain independent financial advice, and consider the applicable Product Disclosure Statement before making an investment decision.
*Financial planning services may be provided by authorised representatives of the Fund's Administrator and wholly owned company, Statewide Financial Management Services Limited, ABN 69 092 109 209 Australian Financial Services Licence No. 239063 or in their capacity as authorised representatives of Quadrant First Pty Ltd (Quadrant First)ABN 78 102 167 877 AFSL No. 284443. Fees may apply for financial planning advice.