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 Financial Happenings Blog 
Tuesday, December 18 2012

A piece in the Sydney Morning Herald last month reported on a study conducted by Goldman Sachs.  The study found that Australians plan to stick with local shares or cash and term deposits - Investors stay close to home.

Recent history has shown that this investment philosophy has provided mixed results.

On one hand, Australian shares over the past decade (to the end of November 2012) have significantly out-performed international developed country markets as a whole when those exposures have not been currency hedged.

On a currency-hedged comparison basis (i.e. removing the impact of the rise of the Australian dollar over the past decade) returns from those same international markets have still been lower but much closer.


On the other hand, international fixed interest and international listed property have significantly out-performed their Australian counterparts.

Emerging Markets exposures have out-performed Australian shares slightly.

Cash and term deposits have under-performed fixed interest (bond) exposures.

But what has happened more recently?

International shares on a currency hedged basis have significantly out-performed Australian shares over 1 and 3 year periods.

International shares without currency hedging have out-performed Australian shares over 3 years and slightly under-performed over 1.

International listed property has significantly outperformed Australian listed property over 3 years with performance equal over 1 year.

International fixed interest has beaten Australian fixed interest over 1 & 3 years with both beating cash and term deposit indices over the same time period.

Whichever way you look at the data, an Australian centric basis for choosing investments has provided mixed results at best.

The data along with the theory should remind all Australian based investors that there is more to building a successful investment portfolio than simply using Australian shares and Australian cash and term deposits.

Regards,
Scott

Posted by: Scott Keefer AT 12:00 pm   |  Permalink   |  Email
 
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