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ASX / Russell Long-Term Investing Report 2005

The ASX / Russell Investing Report 2005 found that, for the 10 years ended 31 December 2005, listed property outperformed all other investment sectors.

The results of the latest survey, revealed that listed property provided after-tax returns of between 12.6% and 10.4% per annum at the lowest and highest marginal tax rate; while Australian shares returned between 11.7% and 9.2% per annum over the same period. 

Listed property has provided a good safe haven for the past couple of years, however over the long-term it has proven to be attractive because of its stable income profile. Both these characteristics have contributed to the sector's strong performance in the recent survey.

The ASX Russell Long-Term Investment Performance Report measures the pre and post tax returns on shares, listed property, residential investment property, fixed interest and cash over 10 years from 1 January 1996 to 31 December 2005.

Key highlights – Investment returns for 10 years to December 2005:

For the top marginal tax

Australian Shares – 9.2% pa
Listed Property – 10.4% pa
Residential Investment property – 9% pa
Fixed interest -  3.7% pa

For the lowest marginal tax rate:

Australian Shares – 11.7% pa
Listed Property – 12.6% pa
Residential Investment property – 10.9% pa
Fixed interest  - 5.8% pa

Over 20 years, depending on marginal tax brackets, Australian shares produced the best returns ranging between 12.4% and 10.4% per annum followed by listed property with returns ranging between 11.8% and 9.7% per annum and residential investment property with returns between 10.9% and 8.9% per annum.

Fixed interest investments enjoyed more modest performance, returning between 8.5% and 5.3% per annum depending on the marginal tax rate applied. Cash returned 5.7% on the lowest marginal tax rate and 3.5% on the highest marginal tax rate including the Medicare levy.
On the results Colin Scully, Deputy Chief Executive Officer of ASX said: “This Report is a useful tool for all investors and other participants in the market. It is important because it takes into account real costs as well as real returns across a range of differing asset classes, providing a unique and useful resource for all market participants. The Report reveals that domestic listed investments have outperformed a range of popular alternative investments, including residential investment property, over the previous 10 years.”

“The last decade has seen the All Ordinaries Index experience a very strong run, while the housing market experienced a well-documented upswing until 2004. Showcasing that all markets are prone to volatility, this report emphasises the need for diversification to accommodate the inevitable rise and fall of any particular asset class,” Mr Scully said.

Mr Peter Gunning, Chief Investment Officer, Asia Pacific, for Russell Investment Group, said in addition to the obvious tax impact, the Report served to remind investors of the cyclical nature of markets, and the dangers of market timing.

“While the Report presents a useful view of long-term investment performance, it is unfortunately not indicative of how asset classes might perform in the next 10 or 20 years,” Mr Gunning said. “For example, the best long-term performing asset class during the 1990s was international shares [highest performer for the 10 years to 1991, 1992, 1993, 1994 as well as 1998, 1999, 2000, 2001] followed by Australian bonds [for the 10 years to 1995, 1996, 1997].”

“The big take-home message for investors however is the magic of superannuation. Under the Government’s proposed Budget measures, people will have more flexibility to keep adding to their super – effectively allowing high income earners to invest at 15% and reap the same improved returns of the lowest marginal tax payers,” Mr Gunning added.

For the full ASX / Russell Long-Term Investing report

The Russell Long-Term Investing Report (the “Report”) was produced by Russell Investment Management Limited (ABN 53 068 338 974) (“RIM”). Any views, opinions or recommendations in the Report are solely those of RIM and do not in any way reflect the views, opinions or recommendations of ASX. The information extracted from the Report is intended to provide a general summary only and does not constitute financial product or investment advice. You should consider obtaining independent advice before making any financial and/or investment decisions. Neither ASX nor RIM give any representation or warranty as to the accuracy, completeness or currency of the content.  To the extent permitted by law, neither ASX or RIM accepts no responsibility or liability for any losses, costs, damages, expenses or claims arising in any way (including due to negligence) from anyone acting upon, relying upon or refraining from acting upon the information or any material arising from or incidental to the information.