Cash and Property most favourable investment

Australia's two most popular investments namely cash and residential property have proved to be the strongest performers in to-days volatile markets, outperforming almost every other asset class and super fund.

According to an analysis of investment returns, residential property has offered the highest total returns during the past three years and cash has come in second place for the past five years.

Love affair for cash and property

Even though the international financial crisis and the economic downturn have both adversely impacted on sharemarkets, managed funds and the commercial property, Australia's love affair with residential property and cash has paid off.

Most residential landlords are still sitting on a strong capital gain, while other assets have fallen by up to 40 per cent. Landlords have also had the benefit of rising rental income as population demand for housing continues to increase.

Even the risk-free cash investors are sitting pretty enjoying some of the strongest returns for the last five years.

SuperRatings an independent superannuation research company stated that it was no surprise that cash had performed well.

Nathan Macphee SuperRatings chief operating officer stated that in almost all time period's cash was in front, however these investors had missed out on the big upturn of the past few months. If one looks at the last three months there has been a profound upturn across all the investment options except for cash.

Invest according to your risk profile

Mr. Macphee further stated that what it showed is that people needed to invest in the option that suited their risk profile, which meant they had to decide if they could survive a downturn like the one we had. If they can't survive for a couple of years in a downturn, then the lower-risk cash option is more appropriate.

However if they were investing for the long term and the majority of investors are, then they should be able to withstand a downturn.

Australian shares are still the best. They were down nearly 40 per cent but they are still the strongest performer over five years.

Research shows that spreading your investments reduces volatility and can provide higher long term results.

Published on July 7-st, 2009 in Financial Planning
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.

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