Long-term Investing involves analysing opportunities for capital growth, risk spreading & diversification as well as strategic decisions. One should also carefully analyse sector as well as industry wise historical performance in order to make sound and rational financial and investment decisions. The key idea is to look for different types on investments in view of a long term horizon and thus the focus comes to stocks, real estate, long-term Bonds, annuities, mutual funds etc. But specific investments may need to be brought into action keeping personal objectives in mind and funds at hand. Punting on multi-bagger investments in stock market entails some volatility to be considered depending on market scenario, while bonds may have a different landscape altogether.
For stocks particularly, rules come into play wherein cherry picking of blue-chips over penny stocks etc. matters. Then how a disciplined investing might help in consideration of not sweating over trivial volatile situations, becomes important.
Many experts and analysts also touch upon the scenario on investing strategies to help investors gauge the landscape and take a plunge accordingly. For instance, Russel Investments, a leading global asset management and advisory firm, every year releases its annual report – “The Russell Investments/ASX Long-term Investing Report “. Through its investment report, past performance for the last 10/20 years across different asset class is being touched upon. The latest 2018 report seems to throw quite interesting facts about returns from past domestic investments in equity market, real estate, fixed income and managed fund as well as foreign investments in global fixed income, global equity market and global property market.
It is worth noting that investment returns from Residential Investment Property have been the best performer among all the asset classes, considering the gross figures of both last 10 years (8%) as well as 20 years (10.2%), although the figures dipped slightly as compared to last year’s report study.
The second position has been grabbed by Global Hedged Shares with 7.2% gross return for 10-year span and 7.4% for 20-year span. The third position is secured by asset class of Global Hedged Fixed Income with 7.1% gross return for 10 year and 7.2% for 20-year duration.
In the light of such observations of past performance, it becomes important to investigate opportunity areas/asset class for future investment.
As per the data, Australian shares market has given a mere gross return of 4% over 10 years span. Market expects some level of future volatility on account of global economic slowdown, US- China trade & sea war and higher interest rate regime in US as compared to unchanged low rates in US since over 28 months now. One must carefully analyse macroeconomic factors, undertake strong fundamental industry wise as well as business wise analysis in order to make profitable investments.
While analysing past performance of real estate, it is very essential to take into consideration whether past contributory factors have strong influential role in future as well. The record high real estate market seems to be overpriced and the bubble characterized by high household debt, lower income growth and reduced savings, might crash anytime soon. The anticipated slowdown in economy triggered by global uncertainty will further aggravate the issue. Property prices have already been falling in Sydney and Melbourne. Investors must strategically align their objectives, measure risk parameters and then make sound decision.
Coming to Australian Fixed Income and Global Fixed Income, the two have performed decently in both 10 years’ (6.2% and 7.1% respectively) as well as 20 years’ span (5.9 and 7.2% respectively). Investors can consider keeping government and corporate bonds as part of their investment portfolio, offering safer returns.
It is extremely important for investors to act intelligently in order to achieve financial goals, accumulate wealth and secure significant gains while making long term investment.
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