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Investment returns have been good, but are likely to slow

Key points

> The ongoing slide in investment yields across major asset classes points to a more constrained medium-term return outlook. For a diversified mix of assets, this has now fallen to around 5.6% pa on our projections.

> The key for investors is to have realistic return expectations; allow that inflation is also low so real returns aren’t down as much; and focus on assets with decent and sustainable income.

Introduction

The past 10 years have seen pretty good returns for well-diversified investors. The median balanced growth superannuation fund returned 7.3% pa over the five years to July and 8.2% pa over 10 years and that’s after fees and taxes. This is impressive given that inflation has been around 2%.

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