The Investor's Lament

It is the investor lament of 2015 – where do I invest now?

You would have been living in a very lonely place to not understand that real estate prices are high and still going higher. Then there is the local sharemarket which is teasing with the index threshold of 6000 having risen about 10% in the first three months of this year.

Such is the power of the 24-hour news cycle and the fascination in Australia with house prices and share market moves.

What about overseas shares? A similar story as they are up 9.6% for the first quarter of 2015 on an unhedged currency basis and 5.2% if the currency impact had been hedged.

Perhaps head up the risk scale to emerging markets. Again a story that rhymes as the index has shown a 9.1% gain for the first quarter.

How about that pillar of reliability – the bank term deposit or fixed income investments. Falling interest rates are naturally compressing return expectations and 90-day term deposits are sitting around the 2.2% mark.

The great irony is that investors are seemingly caught in a near perfect storm of strong past performance. Now that is clearly a better challenge to be facing than the opposite return scenario.

The development of investment markets in the 30 to 40 years has been positive in many ways with investors gaining much greater choice of where and how they can invest. Exchange traded funds, for example, have been a particular boon for investors looking for market exposures at low costs.

But through it all the humble diversified fund has continued to deliver good risk-adjusted returns for investors in a straightforward, disciplined way.

We know from decades of investment market research just how hard it is to pick or time market moves. The beauty of a diversified fund is that rather than try and forecast where the next winning segment will be instead it sets a target asset allocation and then rebalances the portfolio in a disciplined way to manage the portfolio’s risk level.

Diversified funds typically come in a range of risk flavors from conservative through balanced and on up the risk scale to high growth.

So to return to the original question – where to invest now?

Why not everywhere?

Robin Bowerman is Head of Market Strategy and Communication, Vanguard Australia.

As a renowned market commentator and editor Robin has spent more than two decades writing about all things investment.

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing our website content so it may not be applicable to the particular situation you are considering. You should consider yours and your clients’ circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This website was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.