THIS year has been a very good one for most investors. As noted in Money Matters at the beginning of the year the economic fundamentals looked sound suggesting good returns were likely, and it turned out that way, with two weeks to go.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
In fact both 2016 and 2017 have produced strong returns. The only weak period was from May to September this year, but markets have moved ahead since.
For the year to the end of November diversified investment portfolios with up to 70 per cent growth assets earned 13.77 per cent on average according to research firm Lonsec. So investors with around two thirds growth assets and one third defensive would have earned close to that level.
This is also the investment mix for many default super funds. So workers who have not chosen an investment option often end up in this type of fund. Super fund returns would be slightly less due to the 15 per cent tax the funds pay on earnings.
Lonsec says conservative investment portfolios with maximum 30 per cent growth assets earned 6.66 per cent for the year to November.
Returns from most investment sectors other than cash and fixed interest have been high. Australian shares as measured by the All Ordinaries Accumulation Index, which includes dividends, returned 14.83 per cent. This masked varying returns from different parts of the market.
The 20 largest companies in the market which include the big banks and Telstra only earned 9.9 per cent while the Small Ordinaries Index of small company shares doubled that with 20.5 per cent. The banks have had a difficult year and that will continue during the Royal Commission.
Mining companies had a very good year earning 21.78 per cent while the telecom sector dominated by Telstra lost 24.43 per cent as it was sold off following its NBN issues and profit downgrade announcement.
Property funds traded on the share market produced an average return of 13.49 per cent while unlisted commercial property made 12.87 per cent.
Looking overseas we saw global shares outperformed Australian shares once again with the MSCI World Index returning 20.51 per cent, more than 5 per cent ahead of the All Ordinaries. Global infrastructure earned 21.28 per cent.
Investors who chose to keep their money in cash at call earned around 1.75 per cent while those using government and corporate bonds did better than many would have expected at 4.02 per cent.
Even though most sectors did well this year it is still best to diversify. That includes having at least a small exposure to defensive assets such as fixed interest and cash deposits.
