Those hoping for strong investment returns last financial year weren’t disappointed. This follows an equally healthy performance in the 2023 financial year. According to Lonsec Research the typical diversified portfolio with up to 70 per cent in growth assets returned 11.4 per cent.
This means most super funds earned attractive returns in 2024. Even investors who chose to be more cautious with only 30 per cent in growth areas such as shares and property, earned 7.3 per cent for the year.
Australian shares as measured by the All Ordinaries Index returned 12.5 per cent. Large company shares did a little better while small companies paid a little less. Information technology shares starred, returned 28 per cent, while mining companies lost 2.9 per cent.
Once again international shares produced higher average returns than Australian shares. The MSCI World Index returned 19.9 per cent. The best gains were in the US, especially from the major technology companies. Hong Kong and Chinese shares lost money.
Infrastructure investments around the world – toll roads, pipelines, electricity networks, airports and rail tracks – provided a more modest but still satisfactory 6.8 per cent.
Commercial property investments in Australia gave divergent results, depending on whether they were traded on the share market or not. Stock market listed property trusts, the values of which are determined by forward looking share traders, rose sharply. Total returns averaged 23.8 per cent.
However, unlisted properties, the values of which are decided by professional valuers looking back at past sales, fell in value. Their total return including rental income was minus 8.8 per cent on average according to Lonsec Research.
Conservative investors who prefer fixed interest such as government bonds, corporate loans and cash benefited from higher interest rates. They paid 3 to 6 per cent depending on the category.
So, which is the best investment for the long term? One year is quite short, and not a very good indicator. Over the last ten years to June 30 international shares paid 13.1 per cent per annum while Australian shares returned 8.3 per cent.
Australian commercial property listed on the share market made 8.9 per cent while direct unlisted property produced 8.4 per cent per annum. Investing in fixed interest areas generated 2 to 3 per cent annually.
Diversified portfolios with 70 per cent growth assets returned 7.7 per cent per annum for the last ten years. That’s quite an attractive return for a strategy that retains some exposure to defensive assets to reduce volatility.
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