Stay the course – a timely reminder
Stay the course ? a timely reminder
2020 Vanguard Index Chart
2020 Vanguard Index Chart
Where will your goals take you?
Recent events have illustrated just how volatile investment markets can become over very short periods of time.
Yet, while short-term market conditions tend to grab headlines, for investors it's the long-term story that really counts. As the 2020 Vanguard Index Chart shows clearly, while markets do fluctuate on a daily basis, asset values have steadily increased over the last 30 years.
Although the short-term behaviour of investment markets can't be controlled, investors should focus on the things they can control. These include having a long-term plan, diversification across multiple asset classes, minimising costs, and diligently staying the course.
Invest for the long term
Market cycles play out against a backdrop of economic, social and political events and many investors can't resist trying to assign causes to every hiccup in the markets. But it's often impossible to explain market activities until long after the dust has settled.
Markets are unpredictable and trying to time them means you must get two important decisions right: when to get out and when to get back in. This means there is a risk of having to pay a higher price to get back into the market, as well as missing out on the growth from any market recovery.
Allowing emotions to drive investment decisions, be it overconfidence in rising markets or fear in falling markets, rarely serves investors well.
Historical market returns show that those who ignore the emotional swirl of short-term market conditions and focus on the long term are rewarded for their patience and discipline.
Diversify
The index chart illustrates the benefit of diversifying investments across asset classes to help reduce volatility and smooth out returns over time.
Keep costs low
Cost remains one of the most important factors in successful investing, in any market cycle. It's why low-cost funds tend to deliver better returns than high-cost funds over time. At Vanguard we regularly review our funds for ways to reduce costs and give investors their best chance of success. After all, every dollar you save in fees is a dollar more in your pocket.
Investment wisdom
Stay the course. No matter what happens, stick to your program. I've said "stay the course" a thousand times, and meant it every time. It is the most important single piece of investment wisdom I can give to you.
John C Bogle Founder of Vanguard
Diversification often starts by investing across different asset classes but it also includes holding a spread of investments within an asset class across a range of companies, industries and even countries.
While this strategy doesn't protect a portfolio against negative returns, it does reduce the impact of poorly performing asset classes.
Connect with VanguardTM > .au > 1300 655 101
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$100,000$100,000
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InternationIanlteSrhnaarteiosnal Shares
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$50,000 $50,000
Cash Cash
$44,172$454.1,%17p.2a. 5.1% p.a.
R E C E S S I O N 12 R E C E S S I O N 12
LOGARITHMIC SCALE LOGARITHMIC SCALE
RECESSION RECESSION
CPI CPI
$20,439$220.4,%43p.9a. 2.4% p.a.
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$10,000 $10,000
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Average WeAevkelyrage Weekly Earnings $7E7a7rnings $777
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? Copyright?20C2o0pAyrnigdhetx2C0h2a0rtAsnPdtyexLtCdh. aRretsprPotdyuLcttdio. nReepitrhoedruicntiwonhoeliethoerriinn whole or in part is exprpeassrtlyisperoxhpirbeistseldy wpriothoibuittethdewwitrhitotuetntpheerwmrisitstieonnpoefrAmnidsseixon of Andex Charts Pty LtCdh. a(wrtws Pwt.yaLntdde.x(.wcowmw.a.aunodrecxa.clol m18.a0u0 o2r42ca7ll8178) 00 242 787)
2020 Vanguard Index Chart
Our perspective on diversification
The table below shows the performance of various asset classes over the past 30 years. When deciding where to invest, it is important investors understand that the best and worst performing asset classes will often vary from one year to the next. Having a diversified mix of investments across multiple asset classes can help smooth out returns over time.
The table also reinforces the importance of sticking to an investment strategy and focusing on the long term. For example, Australian listed property was the strongestperforming asset class in 2019, returning an impressive 19.3 per cent. By 2020 however, Australian listed property had become the worst-performing asset class with a negative return of 21.3 per cent. This demonstrates the danger in chasing last year's returns.
Financial year total returns (%) for the major asset classes
International
International
Australian International Shares
Australian
Bonds
Year
Shares
Shares
(Hedged)1 US Shares
Bonds
(Hedged)2
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Average Best Worst
5.9 13.0 8.7 15.5 6.4 14.3 26.8 1.0 14.1 16.8 8.8 ?4.5 ?1.1 22.4 24.7 24.2 30.3 ?12.1 ?22.1 13.8 12.2 ?7.0 20.7 17.6 5.7 2.0 13.1 13.7 11.0 ?7.2 9.6 30.3(3) ?22.1(2)
?2.0 7.1 31.8 0.0 14.2 6.7 28.6 42.2 8.2 23.8 ?6.0 ?23.5 ?18.5 19.4 0.1 19.9 7.8 ?21.3 ?16.3 5.2 2.7 ?0.5 33.1 20.4 25.2 0.4 14.7 15.4 11.9 5.2 8.5 42.2(2) ?23.5(2)
?5.8 ?3.0 17.3 6.7 3.7 27.7 26.0 22.1 15.9 12.6 ?16.0 ?19.3 ?6.2 20.2 9.8 15.0 21.4 ?15.7 ?26.6 11.5 22.3 ?2.1 21.3 21.9 8.5 ?2.7 18.9 10.8 6.6 3.6 7.5 2 7. 7 ( 5 ) ?26.6(4)
10.8 16.5 27.9 ?7.8 29.9 13.5 41.5 57.5 14.9 18.2 0.6 ?25.8 ?16.1 14.7 ?2.8 11.5 5.6 ?23.2 ?12.4 9.5 3.1 10.1 35.0 20.8 31.9 7.3 14.4 18.7 16.3 9.6 11.7 5 7. 5 ( 7 ) ?25.8(3)
22.4 22.0 13.9 ?1.1 11.9 9.5 16.8 10.9 3.3 6.2 7.4 6.2 9.8 2.3 7.8 3.4 4.0 4.4 10.8 7.9 5.5 12.4 2.8 6.1 5.6 7.0 0.2 3.1 9.6 4.2 7.9 22.4(3) ?1.1(2)
15.3 15.8 14.7 2.1 13.1 11.2 12.1 11.0 5.5 5.0 9.0 8.0 12.2 3.5 12.3 1.2 5.2 8.6 11.5 9.3 5.7 11.9 4.4 7.2 6.3 10.8 ?1.0 2.5 7.0 5.4 8.2 15.8(3) ?1.0(2)
Cash
13.5 9.0 5.9 4.9 7.1 7.8 6.8 5.1 5.0 5.6 6.1 4.7 5.0 5.3 5.6 5.8 6.4 7.3 5.5 3.9 5.0 4.7 3.3 2.7 2.6 2.2 1.8 1.8 2.0 0.8 5.1 13.5(0) 0.8(7)
Australian Listed
Property
7.7 14.7 17.1 9.8 7.9 3.6 28.5 10.0 4.3 12.1 14.1 15.5 12.1 17.2 18.1 18.0 25.9 ?36.3 ?42.3 20.4 5.8 11.0 24.2 11.1 20.3 24.6 ?6.3 13.0 19.3 ?21.3 9.3 28.5(3) ?42.3(4)
International Listed
Property3
?15.9 6.9 28.3 8.4 7.5 2.4 35.7 25.0 ?6.8 14.1 38.2 7.5 ?5.2 28.7 21.2 24.2 3.0 ?28.6 ?31.2 31.3 9.2 7.5 24.3 11.8 23.1 20.4 ?4.8 9.0 13.5 ?13.4 9.8 38.2(4) ?31.2(4)
(X) denotes the number of times each asset class was the best/worst performer during a financial year ending between 1991 and 2020. Source: Andex Charts Pty Ltd. Notes: 1. MSCI World ex-Australia Net Total Return Index (Local Currency) ? represents a continuously hedged portfolio without any impact from foreign exchange fluctuations. 2. Index prior to 30 June 2008 is the Citigroup World Government Bond Index AUD hedged, from 30 June 2008 the index is the Bloomberg Barclays Global Treasury Index in $A (Hedged). 3. Prior to 1 May 2013, index is the UBS Global Real Estate Investors Index ex-Australia with net dividends reinvested. From May 2013 the index is the FTSE EPRA/NAREIT Developed ex AUS Rental Index with net dividends reinvested. Past performance is not an indicator of future performance.
Connect with VanguardTM > .au > 1300 655 101
What makes us different
What sets Vanguard apart -- and lets Vanguard put investors first around the world -- is the ownership structure of The Vanguard Group, Inc., in the United States. Rather than being publicly traded or owned by a small group of individuals, The Vanguard Group is owned by Vanguard's US-domiciled funds. Those funds, in turn, are owned by their investors. This mutual structure aligns our interests with those of our investors and drives the culture, philosophy and policies throughout the Vanguard organisation worldwide. As a result, Australian investors also benefit from Vanguard's investment approach.
Vanguard's interactive index chart--tell the story your way
Build your own customised version of the index chart with 45-years of investment performance of major asset classes as well as key economic, social, political and demographic changes at .au/indexchart.
Connect with Vanguard? > .au > 1300 655 101
Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken your or your clients' circumstances into account when preparing this document so it may not be applicable to the particular situation you or your client are considering. You should consider your and your clients' circumstances, and our Product Disclosure Statements ("PDSs"), before making any investment decision or recommendation. You can access our PDSs at .au or by calling 1300 655 101. Past performance is not an indication of future performance. This document was prepared in good faith and we accept no liability for any errors or omissions. ? 2020 Vanguard Investments Australia Ltd. All rights reserved. ICBROCHADV_072020
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