The returns which investments deliver vary from year to year and in different economic periods. Generally, shares will outperform property and both of these assets will outperform cash or fixed interest securities. This is a trend which has been identified over the past ten years. However, there are certain risks involved in share investments.
Shares
Investments in shares – known also as equities – are investments in companies. When an individual invests in shares, they become known as a shareholder.
A shareholder has some ownership in the company and its profits, and their shares can produce benefits through:
* Dividends paid when the company makes a profit
* An increase in the share price of the company, so that a profit is made when the shares are sold.
Investment features
* Generally classified as a high growth asset
* Typically earn higher investment returns over the longer term
* Experience short-term volatility based on the ups and downs of the stock market and company performance
* Best for long-term investment.
Historical performance
The graph below shows the value of $10,000 invested in Australian and international shares from June 1975 to June 2005.
Shares past performance graphSource: JANA Investment Advisers
Expected rate of growth
High growth over the longer term. The average annual return after inflation over the 10-year period since 1996 was 12.01% for Australian shares, and 6.63% p.a for international shares. The average inflation rate during this period was 2.6%. Historically, shares are expected to have a higher growth/return over the long term than most other asset classes.
Level of risk
There is high volatility in the share market from year to year. Shareholders should be prepared to experience the highs and lows, including the possibility of negative returns in some years, to gain the higher returns that are generally produced over a longer period.
Source: JANA Investment Advisers. Figures are based on the S&P/ASX 300 for Australian shares and the MSCI World (ex. Australia) Index (unhedged) for international shares.
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.