If you’re at the point where you have some money saved and put to one side, you may now be looking to grow that pot into something bigger. In an unpredictable world market, it is best to put your money into the safest (if there is one) option. If you’re wondering what this option is, the below 4 areas – also known as asset classes – are the top performing assets currently in Australia in terms of ROI.
The performance of these assets can differ over time, like anything, the greater level of risk will perform better over a longer period compared to those quick investments with a low-level amount of risk. Beneath we have assessed these the different assets and their potential!
The Property Market
More than likely your first thought, the property market can offer a great return on investment and there are stats to back up your thoughts. Reported by one of Australia’s top investment companies in their annual investment report, the Australian residential and commercial property investment sector averaged an 8% return per annum over the last decade. The market itself can be expensive and tough to get on the ladder, however, it is the most popular asset class for a reason. The market has been booming across parts of the country over the last few years, with demand being at its highest in Sydney. According to the CoreLogic RP Data Daily Home Value Index, as at 11th of July 2016, Sydney house prices have risen 10% since the same time in 2015.
From a commercial investment point of view, cities such as Sydney are offering great incentives to new businesses which is why the market has boomed over the last decade, especially in the engineering sector. There are been a number of cases in recent times where a business rates appeal has been made that greatly favours companies in the city. This, in turn, has spurred on a number of larger-scale investments in the area due to the profitability of the high in demand location.
Cash assets such as savings accounts and term deposits are the most liquid of all the different classes listed here – basically that they can be most readily converted into cash. Despite it offering the lowest form of return, it is without a doubt the safest form your money can take. According to recent reports, cash averaged a 3.1% return per annum over the last decade. The poor interest doesn’t spur interest but having cash available means that you can access your money immediately whenever you need it.
When it comes to fixed income assets, this refers to government and/or corporate bonds. These are often seen as a stable and reliable return. When entering into a bond, simply put, you are lending the government money for which they will pay you back with interest. The interest is given to you in instalments based on the length of the bond you’ve entered into. Australian fixed income assets interestingly averaged a 6.2% return per annum over the last decade. Despite it being a slow burning investment, it offers a strong tick in terms of your investment portfolio as it can offset any losses you may have from the shares market.
Dependant on the equities you pick, purchasing equities such as public shares can provide high return but also offer significant losses, which is why it is the riskiest asset class of all. With constant market fluctuations in price, it can offer large gains or big losses. Australian shares averaged a 5.5% return per annum over the last decade. This makes it the second-lowest-returning Australian asset class out of the four.
In the above mentioned, long-term Investing report, Australian shares were the highest performing asset over 10 years with an average return of 7.1% per annum. This number fell to 5.5% in this year’s report because of weak returns in 2015 and the exclusion of 2005’s strong returns of 22.5%. This option, however, especially if you’re a novice, is often delegated to professional investment advisors so they can handle trades for them.