The financial markets have a long history of rewarding long term investors. The charts below show the performance of a typical client in a Balanced 70% Growth/30% Defensive portfolio. We then put that short-term performance in perspective by showing it in the context of the longer-term performance of this same portfolio.
12-month performance of a Balanced investor (to end of March 2020)
The chart below shows that $1 invested 12 months ago in a Balanced strategy would now be worth approximately $0.94. The same investment in cash would be worth approximately $1.015, outperforming the Balanced investor.
Source: Dimensional Fund Advisors
5-year performance of a Balanced investor (to end March 2020)
The chart below shows that $1 invested 5 years ago in a Balanced strategy would now still be worth approximately $1.20 despite the recent heavy market corrections in early 2020. This is twice the return from the same investment in cash which would be worth approximately $1.10.
Source: Dimensional Fund Advisors
15-year performance of a Balanced investor (to end of March 2020)
The chart below shows that $1 invested 15 years ago in a Balanced strategy would now be worth approximately $2.60. This time period includes the Global Financial Crisis as well as the recent heavy market correction in early 2020. The same investment in cash would be worth approximately $1.75.
Source: Dimensional Fund Advisors
As you can see diversified portfolios with defined exposures to shares, bonds and property have provided growth of wealth that has more than offset inflation and cash returns.
It pays to take a longer-term perspective and not get pulled off track by the distractions of right now.
Next steps
To find out more about how any of these measures may be of assistance in your individual circumstances, please contact Gordon Thoms or David Conte at Calibre Private Wealth Advisers on ph. (03) 9824 2777 or email us here.
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