Investors including retirees and super fund members have, in many but not all cases, enjoyed another good year of returns. It’s been the third year in a row of strong returns. However it has been very important to hold a diversified range of investments. Some market sectors did not do so well.

According to investment research firm Lonsec the average diversified portfolio with seventy per cent in market linked growth assets such as shares, property and infrastructure, returned 10.1 per cent for the twelve months ended 30^th November.

Lonsec says even conservative portfolios with less than one third invested in the growth areas and more than two-thirds in stable cash and fixed interest earned 6.0 per cent.

Australian shares as measured by the All Ordinaries Index returned a modest 5.8 per cent, a good reflection of some very divergent sector returns. The twenty largest blue-chip companies were quite disappointing with dividends and capital growth totalling only 2.2 per cent.

Financial companies produced just 3.8 per cent on average. So investors with most of their money invested in shares of the big banks would be quite disappointed.

Conversely small company shares had an outstanding last twelve months. The Small Ordinaries Index produced 19.4 per cent return. The leading industries were mining companies with 24.3 per cent and telecoms with 27.5 per cent return.

At the bottom of the list healthcare companies lost 19.4 per cent and IT businesses cost their owners 15.4 per cent.

Australian commercial property also produced low returns. Stock market listed property earned just 1.3 per cent. Unlisted direct property as measured by Lonsec did little better at 2.3 per cent.

The largest contributors to the strong returns from diversified portfolios were international shares. The global share MSCI World ex-Australia Index earned 16.5 per cent for the year to November 30.

Returns in most countries were good. The Japanese and Hong Kong markets earned more than 30 per cent. The British, German and Shanghai China share markets all exceeded 15 per cent, and the US S&P500 Index made 13.5 per cent. Global infrastructure investments also did well returning 15.6 per cent.

Cautious investors who stuck to cash, secure fixed interest and government bonds earned 3.7 to 4.3 per cent. High grade overseas fixed interest investments made similar returns on average.

The CPI measure of inflation was 3.16 per cent. That’s what investments needed to grow by to preserve their real purchasing power. It was easily achieved by well diversified super, pension and investment funds.