Shares trump property and cash investments: Oliver

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Bank deposits became the favoured investment strategy following the GFC, but some economists say shares now trump both property and cash.

While bank deposits offer safety and have paid good interest rates to savers and retirees, cash comes third in the race for investment returns, according to financial reporter Anthony Keane and AMP Capital.

AMP examined the growth and income provided by property, shares and cash since 2003, and found shares had the highest investment return of 8.7% per year, while property was 5.5% and cash 5.3%.

The company’s chief economist, Shane Oliver, says the past five years have been bad for shares.

“They are still one-third down from their high in 2007 and that’s why people are feeling depressed.”

He says shares looked positive in the 10-year analysis because it also covered the boom years of the mid-2000s, and included the solid dividend income paid by shares averaging about 4.5% per year over the past decade.

''Property also had a great run until 2008 with a once-in-a-generation boom that got under way in the mid-90s. But it fell out of bed in 2008 with a lot of forced sales and low confidence. Cash has had a great run but it's starting to slow down.''

Oliver says bank deposit interest rates were likely to fall further in 2013 as the RBA was expected to continue lowering the official interest rate.

Keane says forecasters don’t expect big gains from property in 2013, although falling interest rates are likely to support house prices.

Oliver says the key message for savers and investors is to diversify across cash, shares and property.

''Cash was the place to be in 2011 but there's a danger for ordinary Australians. Trying to pick what asset is the best place to be for the next year, on the back of what happened last year, is bound to be a loser's game.''

  • Tyler Leese on 7/01/2013 7:12:15 PM

    Great article and good points. As you mention, confidence was extremely vibrant up until 2008, then we have seen more of a hedge action occurring as investors head into cash and dividend shares, income is always going to be first when considering investments and this will boost the staple shares in 2013 I believe. Comodities were once again safe in 2012, but I think we are going to see some sell offs in 2013 as fear and overseas decisions will drive investors back to cash with low rates for safety, not growth.

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