Investment returns mosaic for period ended 31 December 2011

January 2012

The Stewart Group investment returns mosaic for the period ended 31 December 2011 provides an excellent insight as to why investors should remain diversified and not chase last year’s best performer.  This mosaic is updated annually in line with our Investment philosophy.

When evaluating the mosaic the following points are evident:

• Fixed interest investments have low volatility versus equities.
• Value and Small stocks typically outperform Large Cap stocks.
• Last year’s top performers will not necessarily do well this year.  In fact there is usually a good chance they have become overpriced and will perform worse than average.  The results for 2011 certainly proved this to be accurate.

In 2009 and 2010 three of the top performing asset classes were Australian Small, Australian Value and Emerging Markets, providing returns over this period of 93.76%, 57.44% and 55.67% respectively. 
 
However, in 2011 these three sectors were the three worst performers, with Australian Value yielding -15.22% (the first negative return from this Asset Class since 2008) Australian Small -18.74% and Emerging Markets -24.3%.
 
Many investors would have been left wondering how the two favoured investment sectors for 2011 performed so poorly when Emerging Markets were ‘Flavour of the Month’ with their export boom and high growth rates, and Australia ‘The Lucky Country’ continued to display signs of ongoing growth above any other Western nation. 
 
It goes to show that there is no sure thing in investment markets and as history has shown, investment pundits more often than not under-perform the broader average with their forecasts. 
 
If you require clarification on any aspect of the mosaic, please feel free to contact us.