Investors should avoid ‘playing it safe’ with cash allocations and look toward diversified portfolios, according to Russell Investments.
Data from Russell’s 2013 risk versus return analysis show that growth assets outperformed cash allocation in 2012, highlighting the benefits of a multi-asset portfolio for investors in the current market.
“I really think the diversification story speaks for itself, that in a very volatile environment you need access to multiple sources of return and you need to spread your risk in an effective way – a multiple-asset profile does that,” said Scott Fletcher, Russell Investments’ director of client investment strategies.
“You can try to pick winners and run to cash when things are bad and you miss the rebounds, but a multi-asset portfolio is a way to provide a stable, strong engine for wealth creation over a long period of time.”
Data from Russell Investments show that investors who moved to cash assets during 2012 to avoid volatility would have only received a four per cent return.
However, Australian Real Estate Investment Trusts (A-REITs) achieved a 32.8 per cent return over the course of 2012, despite losses in previous years.
Other growth assets also performed well, with Australian equities and global shares (hedged) delivering a 20 per cent return and global shares providing 14.7 per cent returns.
Investors with cash assets should look to move into riskier allocations in 2013 but should still remain cautious, according to Russell Investments.
“There is more of an upbeat move at the moment, but volatility is still a feature of the market,” Mr Fletcher said, “so you really need to think, through 2013, about how to pivot out of those defensive bond and cash type allocations to more growth-focused allocations.”
