Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 267

Interactive: where will your goals take you?

Introduction

Editor's note: We like to share useful resources with our readers, and Vanguard has updated its Interactive Index Chart on this link.  

It shows market performance of various asset classes since 1970, and allows the reader to compare the growth of $10,000 invested in these asset classes over historical periods.

Developing a plan 

Buying your first home. Travelling the world. Enjoying a full and rewarding retirement.

When you invest, it’s important to have a plan in place to give yourself the best chance of achieving your goals. Without a plan, it’s easy to get distracted. You can end up trying to time the market, chasing performance and missing out on potential long-term returns. With a detailed and measurable plan, you know where you’re heading. Along the way, you don’t know exactly what each day will bring.

While you can’t control investment markets, there are things you can control when it comes to investing, such as focusing on the long term, diversifying your portfolio across asset classes, and making sure you don’t pay more than you need to invest.

Focus on strategic asset allocation

Building an investment strategy framework, one that aligns your risk profile with your investments, provides a solid platform for you to achieve your goals and expectations.

Research shows that the key to long-term investment performance is effective asset allocation. The chart below is from a study Vanguard conducted which looks at the returns of 600 Australian balanced funds across more than 25 years. It found that asset allocation was responsible for 89.3% of a diversified portfolio’s return patterns over time. This leaves only 10.7% for factors such as market timing or securities selection.

That’s why it is important to dedicate time to asset allocation decisions before you start investing. It can mean the difference between achieving your goals or simply aspiring to them.

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 Vanguard Index Chart illustrates the benefit of diversifying investments across asset classes to help reduce volatility and smooth out returns over time. 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.

Keep costs low

All else being equal, investments with consistently low management fees and transaction costs can provide a head start in achieving competitive returns. Management fees create a drag on returns that can make it more difficult for a fund manager to add value. Factors such as high portfolio turnover within a fund can also lower its tax efficiency and drive up transaction costs.

The bottom line is—lower fees mean you get to keep more of your returns, which can help you earn more over time.

Click to enlarge

Our perspective on diversification

The table below shows the performance of various asset classes over the past 30 years.

When deciding where to invest their money, 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, the declining returns from international shares (hedged) in the 2016 financial year may have swayed investors to move out of this asset class in search of better returns elsewhere. In taking this option, investors would then have missed out on the 18.9% return in the 2017 financial year.

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 vanguard.com.au/indexchart.

Robin Bowerman is Principal and Head of Corporate Affairs at Vanguard Australia, a sponsor of Cuffelinks. This article is general information and does not consider the circumstances of any individual.

For more articles and papers from Vanguard Investments Australia, please click here.

 

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

The rubbery numbers behind super tax concessions

In selling the super tax, Labor has repeated Treasury claims of there being $50 billion in super tax concessions annually, mostly flowing to high-income earners. This figure is vastly overstated.

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Latest Updates

Taxation

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

7 key charts on the state of the Australian property market

The Australian property market stirs fierce debate - often bullish optimism versus crash predictions. But beyond the noise, seven charts reveal what's really driving prices and the outlook for residential real estate.

A simple alternative to the $3 million super tax

Division 296 aims to introduce improved fairness into the superannuation system, yet is overly complex. This scours the world for better ideas and suggests a simpler alternative which can achieve the same goals.

CBA and the index conundrum for super funds

After the hyperbolic rise in CBA shares, super funds are floating the idea of carving out the weightings of ASX bank securities and indexing them within their portfolios. This looks at why that might be a big error.

Strategy

10 policies to drive Australian productivity higher

Here's a comprehensive list of proposed reforms to fix Australia's stagnating economy, including introducing a flat income tax rate, reducing migration, and making childcare tax-deductible.

Interviews

Where to find big winners in Asia

As more money looks for a home outside the US, Asia may soon get some love. Fidelity's Anthony Srom outlines the best places in Asia to invest, including in Chinese consumer names, Indian financials, and Thailand.

Investment strategies

We have trouble understanding the time value of money

We overvalue the present and underestimate the future - it’s a cognitive glitch called hyperbolic discounting. It affects savings, spending, and loans, and it's more common - and costly - than we think. 

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.