Diversified investors were once again rewarded for their efforts in 2014, with positive (if somewhat patchy) returns delivered across most asset classes. Australian shares underperformed their global counterparts once again, whilst many Australians enjoyed strong growth in the value of their residential properties.
The table below shows the returns for each of the major asset classes and forecasted returns for 2015.
Shane Oliver, Review of 2014, Outlook for 2015 – 6 January 2015
Global growth was ok, the threat of deflation continued. Central Banks (with the exception of the US) continued with monetary policy easing and geo-political risks continued to scare all but the bravest of people. Investing takes courage and a long term focus, but most of us need to take on some risk to ensure our capital keeps pace with inflation.
The outlook for 2015 suggests another sound year for investors.
The European Central Bank is demonstrating their commitment to restarting the European economic locomotive by launching a EUR1trllion quantitative easing program whilst the US Congress has been more effective and their economy continues to strengthen (the phasing out of the US Federal Reserve’s quantitative easing program is evidence things are improving).
China is facing a future with lower economic growth, but with forecasted GDP growth for the next 12 months of around 7% it’s still an environment worthy of optimism.
Australia is facing headwinds, but with room to move on interest rates, a declining Australian dollar supporting our exporters and signs of life in the non-mining sectors we foresee a positive year for investment markets domestically. As appears to the norm now geo-political risks remain heightened.
The ISIS threat continues, the behaviour of Boko Haram in Nigeria is deplorable and the threat of terror attack continues unabated. Despite these challenges (and to quote Dr Shane Oliver, Head of Investment Strategy and Economics at AMP Capital) investors should always remember the following tips.
- The power of compound returns – saving regularly in growth assets can grow your wealth substantially over time
- The cycle lives on – markets go up and down and we need to be realistic about this
- Invest for the long term where possible – stay the course when you can
- Avoid the crowd – if you follow the herd you’ll invariably ‘buy high’ and ‘sell low’
- Accept that it’s a low return world to avoid disappointment – low economic growth generally delivers lower returns on investment assets
- Always diversify – smoothing out your investment journey can make a material difference to securing your long term financial future
- The cycle lives on – markets go up and down and we need to be realistic about this
- Invest for the long term where possible – stay the course when you can
- Avoid the crowd – if you follow the herd you’ll invariably ‘buy high’ and ‘sell low’
- Accept that it’s a low return world to avoid disappointment – low economic growth generally delivers lower returns on investment assets
- Always diversify – smoothing out your investment journey can make a material difference to securing your long term financial future
In times of uncertainty, your investment strategy is more important than ever. How else do you plan to meet those long-term objectives like retirement or paying for your children's education?
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Written by: Matt Smith - Director - 0410 526 499
