Time in market more beneficial than market timing
Some $10,000 invested in Australian shares 30 years ago would have grown to more than $130,000 this year, second only to US shares, according to Vanguard.
The firm tracked 30 years performance of major asset classes and found Australian shares would have yielded 8.9% per annum. By 30 June 2020, the total assets would have grown to $130,457.
If the person had invested $10,000 in Australian bonds, these would have generated a 7.7% annual yield and grown to $93,454.
The growth of Australian equities was the second-best performing asset behind US equities which had annual yields of 10.3% and would have grown to $186,799 over the 30 years.
The table demonstrated the power of investing as if the asset had only been held in cash, it would have grown to just $44,172.
Vanguard said the 30-year period had been “bookended by two recessions”, one in 1990-1993 and the recession this year caused by the COVID-19 pandemic.
|
$10,000 invested in 1990* |
Accumulated investment value at 30 June 2020 |
% returns per annum |
|
Australian shares |
$130,457 |
8.9% |
|
International shares |
$82,969 |
7.3% |
|
US shares |
$186,799 |
10.3% |
|
Australian bonds |
$93,545 |
7.7% |
|
Listed property |
$95,395 |
7.8% |
|
Cash |
$44,172 |
5.1% |
*Growth of $10,000 with no acquisition costs or taxes and all income reinvested.
Robin Bowerman, head of corporate affairs at Vanguard, said: “There’s a wealth of research to show that time in the markets benefits most investors more than market timing, largely because market timing is incredibly challenging. The best and worst days often happen close to one another and in many cases, timing the market for re-entry simply results in selling low and buying high.
“It can be hard to tune out daily market noise – particularly when it is being driven by a global pandemic – and procrastination is a natural result for those at the start of their investing journey.”
AUTHOR
Laura Dew
Recommended for you
A leading consultancy believes asset managers will be reluctant to expand overseas in 2025 as high distribution costs blow out potential benefits, but this is providing tailwinds for Australian third-party distributors.
Three of the largest ETF providers reported net inflow increases of more than 100 per cent during 2024, as Betashares admits it “underestimated” the scale of annual inflows the industry would see.
As Magellan Financial Group continues its search for a permanent chief financial officer, it has looked internally for an interim replacement.
Bennelong Funds Management has announced its first responsible entity service client, having flagged it as a 2025 priority for the firm.
