The figures for 2022-23 are in. Most investment returns for the last financial year look surprisingly good. The average return on a typical diversified portfolio was 9.4 per cent according to investment research firm Lonsec. That is for a mix of 70 per cent growth assets and 30 per cent defensive.
Growth assets are property, shares and market linked investments in Australia and overseas, that fluctuate in value but usually earn high returns long term. Defensive assets are cash and interest bearing deposits that have stable values but lower earnings.
Financial advisers and default super funds frequently adopt a 70:30 approach with many super funds calling it balanced. Super fund research firm SuperRatings says the median balanced super fund earned 8.5 per cent last year, after paying internal earnings tax.
Lonsec Research says capital stable portfolios with 30 per cent in growth areas and 70 per cent defensive averaged 5.6 per cent pre-tax for the year. High growth funds with 90 per cent in growth areas and only 10 per cent defensive made 11.6 per cent. Of course, they fluctuate more.
One reason many investments had a good year is that the July 2022 starting point was a low point for markets. That’s a good place to measure from if you want to post a high return. June 2023 wasn’t a very strong point either, but not as weak as 2022.
Specific investment classes also showed healthy returns. The All Ordinaries Index of Australian shares returned 14.8 per cent for the year including dividends paid. Larger companies did a little better than smaller ones, but all were sound.
The outstanding sectors of the market were resources, mining and IT related companies, earning more than 20 per cent. Consumer staples and healthcare companies were weakest but still produced around 6 per cent.
The best performing investment class was international shares once again. The MSCI World Total Return Index earned 21.1 per cent for 2022-23. International shares have returned 13.0 per cent per annum for the last ten years. The Japanese and German markets did best while China’s were weakest.
Property funds traded on the ASX provided 7.5 per cent return for the year while direct commercial property was weaker with an estimated return of only 3.3 per cent.
The yield from cash on call for the year, the Bank Bill index, was 2.9 per cent. That can be compared to inflation. The CPI rose 5.6 per cent for the year to May. So cash in the bank lost around 2.7 per cent of its value.
All investments earned sound returns for the year, though cash and fixed interest returned less than inflation.