Thanks to social media it has never been easier to get short-term attention. At the same time it has never been harder to keep the focus on the long-term.
In this age of instant communication our attention span is apparently continuing to shorten to the point where internet marketers now work on the basis they literally have only to count to 10 to have lost your attention.
There is no doubt the pervasive impact of technology has been generally positive on investing in terms of dramatically improving accessibility and giving investors better information and investing tools.
Want to look up a share price quickly? Grab your smart phone or tap your watch.
Want to compare a number of investment funds? Take your pick from a range of websites.
Want to consolidate your super funds? Download the app.
But this era of instant information can be contradictory with the notion of investing for the long term.
While today we measure some things in nanoseconds investing for our retirement is still firmly anchored in years and decades.
So investors today are conflicted with ever-increasing levels of instant information demanding not just attention but promoting the need to act, now.
A quick scan over the past 12 months shows that it has been a good year for dramatic headlines courtesy of a volatile global economic landscape.
There has been the usual collection of plunging markets and rollercoaster rides vying for our attention along with media reports of house prices falling followed soon after by house prices setting record high growth rates…
There was also the coining of a new word to strike fear into an investor’s heart – Grexit – as a result of the brinkmanship and confusion around Greece’s economic position.
This is where both traditional and new media technology platforms that feed our seemingly insatiable need for information can be both friend and foe.
Friend when it delivers accurate information that helps educate and inform investors about what is happening in markets and its constituent parts and provides direct access at lower transaction prices.
But it quickly turns to foe when the 24/7 media cycle fuels short-term emotional responses to the latest piece of market news.
This week Vanguard released its 2015 version of the Index chart. The analysis, which measures returns across key market indexes over a 30 year period, tracked market moves across Australian shares, international shares, US shares, Australian bonds, listed property and cash. Analysis of Australian shares based on a $10,000 investment in 1985 shows it would have accumulated to $215,685 today, with an average growth of 10.8 per cent per annum.
The aim of the Index Chart is to provide long-term context to how investment markets perform through good and bad times.
The clear message from the historical performance of investment markets is that time is indeed an investor’s friend – provided they can ride out the inevitable troughs and resist the siren calls of when markets are climbing ever higher.
When you look at the performance of the various asset classes what is clear is that investors have been rewarded over the long run for taking on risk.
| $10,000 invested in 1985 | Accumulated investment value 2015 | 30 year percentage returns |
|---|---|---|
| Australian shares | $215,685 | 10.8% |
| International shares | $118,257 | 8.6% |
| US shares | $187,872 | 10.3% |
| Australian bonds | $145,055 | 9.3% |
| Listed property | $149,198 | 9.4% |
| Cash | $86,815 | 7.5% |
| CPI (to March 2015) | $27,532 | 3.5% |
That said there is no guarantee that historical performance will be repeated. The challenge for investors – and the advisers that work with them – is to get the portfolio mix right between growth and defensive asset classes to suit the individual risk profile that is unique to your age and circumstances.
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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. |
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