Our investment mosaic shows individual asset class returns from the highest performer to the lowest performer on an annual basis.
The chart also illustrates the following important investment concepts:
- There is no pattern in performance. No one can consistently predict which asset class will outperform which other asset classes. For this reason it is important to diversify and have exposure to all asset classes (the proportions will depend on your circumstances, goals and objectives, time horizon and risk profile).
- You should not be invested in only one asset class (or equally only invested in several securities within an asset class). Investing in only one asset class can result in a large variation of expected returns.
- It is not a good investment strategy to “chase winners” by investing in last year’s top performer. The mosaic shows that outperformance in one year can lead to underperformance in the following year or two.
- In the long term:
- Small and Value stocks outperform Large stocks
- Diversified Fixed Interest outperforms Government Bonds and short-dated deposits
- In the long term, returns are positive by remaining invested.