Almost 12 years ago, Count made 12 separate investments of $10,000 into a range of investments to demonstrate the principles of successful investing. We invested across Australian and International shares, property, fixed interest and cash, but how have we fared? And, what does it tell us about investing wisely?
Overall portfolio performance
In almost 12 years, our initial investment of $120,000 has
increased by around 240% to $409,431. This is an average
yearly return of approximately 11%.
In 1995 when the portfolio was established, we predicted that the share funds would be the top performers, with diversified funds following. We also predicted that listed property would be a solid performer, with cash and interest based investments at the lower end of the scale. Our predictions have generally been on the mark!
The rise of the Australian sharemarket
2006 saw the Australian sharemarket rise to an all time
high. At the same time, it saw a lot of volatility within
the market. For example, the telecommunications and energy
sectors underperformed compared to the overall market, while
the utilities and property trust sectors performed well
– with the latter outperforming the overall market.
This is indeed exemplified by our portfolio’s Property
Securities Fund, which grew by 36.5% over the year.
Asian sharemarket finally gains momentum
Over 2006, the Asian sharemarket outperformed the US and
European markets. Our Asian share fund also performed well
with a 19.75% return over the past year.
Where should investors look in 2007 and beyond?
While the Australian and International sharemarkets have
produced positive returns over the past year, it is important
to remember that markets can change quickly. What performs
well over one year can be quite different over five or ten.
Our Asian fund is a prime example. Whilst last year’s
returns were good, over the 12 years, it has been up and
down.
On the flip side, our cash investments have been slow but steady performers over the 12 years.
Our own portfolio demonstrates to investors two key principals of successful long term investing:
 |
Minimising risk through diversification By investing across sectors, assets and markets, we have diversified our portfolio and ensured that our risk is minimised. Over the years, the positive returns from the strong performers of the group have smoothed out negative returns from the poorer performers. If we had invested solely in one area, such as Asian shares, our overall portfolio return would have been much lower, and overall, a very high-risk strategy – despite the positive returns this sector produced in 2006. By diversifying our portfolio we have come out on top – and minimised our risk over the investment period. |
|
Ride out volatile markets and stick to your long-term plan The graph shows that the performance of our investments has varied. What performs well one year, can falter the next – showing that it is very difficult to be able to predict when and where to invest. For example, the BT International Fund peaked in 2000, but has struggled to regain footing ever since. |
| Even the top performer, the BT Smaller Companies Fund, has had its fair share of ups and downs over the years, but by sticking it out over the long term, the investment has paid off. Rather than trying to pick the best investments from year to year, the smarter strategy is to ride out the bad times and adhere to your long-term investment plan. |
| Our investments show that diversified and long term investing has paid off. Speak to your Count adviser if you are interested in setting up an investment plan that can help achieve your goals and build your wealth. |
Next: The changing face of 'retirement' |
As at
17 May, 2007 |
