Growth assets lead the charge

Investors who played it safe would be sorry, reports Pam Walkley

Pam Walkley

S&P/ASX ALL ORDINARIES

SOURCE: ASX

AUSTRALIAN SHARES turned in an impressive performance in 2012 and have continued to display strength into 2013.

Local shares soared 19.1% in 2012, as measured by the S&P/ASX 300 Accumulation Index, according to Russell Investments, making them the second-best performing asset class.

Hedged international shares also scored an impressive 19.1% return in 2012.

But by far the strongest asset class was A-REITs (Australian real estate investment trusts), with a 32.8% gain, making up for losses in previous lacklustre years.

Overall, growth assets staged a strong recovery. By contrast, the 2011 performance winners, Australian and international bonds, returned 7.7% and 9.7% respectively.

Those “playing it safe by sitting on the investment sidelines in cash during 2012 would have missed out on the strong performance of growth assets, with cash returning only 4%”, says the Russell analysis.

Over the 32 years since 1981, shares have produced the highest average return of 13.9% a year, says Russell, but they have also displayed the highest average risk of 23.1% a year.

Top sectors in 2012 included telecommunications, healthcare, banks and the mining materials sectors.

The attraction of dividends was one of the main drivers for the performance of the banks and telcos.

The overall market has risen further in January, a rally sparked by the US not falling off the so-called “fiscal cliff”, although there has been some volatility.

After ending the year on 4665, the All Ordinaries Index had risen to just under 4800 at the close of trading on January 18. Some analysts have started to question whether the rally can continue if company earnings do not grow strongly enough to justify higher stock prices.

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