A review of the last two decades in investing

Robin Bowerman, Head of Corporate Affairs and Editor of Smart Investing, is retiring after almost 20 years with Vanguard. Here he reflects on the investment landscape over the last two decades.


Significant life events are often a useful catalyst for a deeper review of financial plans and investment portfolios.

So as your correspondent prepares to sign off and embrace life after a full-time career it seems like a good time to review the journey over the past two decades since Smart Investing began making its way into Vanguard investors’ inboxes.

December 2003 was when I climbed aboard the good ship Vanguard. John Howard was in the lodge and the Reserve Bank had just raised interest rates 0.25% – that has a familiar ring- with the cash rate then 5.25%.

Investing, as is life itself, is as much about the journey as the destination – and it has been quite the journey since 2003. While past performance is no guarantee of what the future will be like, it does present a good chance to test Vanguard’s investing principles against the real-world experience of the past two decades.

So how did the principles of …

  • Set clear, appropriate investment goals
  • Develop a suitable asset allocation
  • Keep costs low
  • Maintain perspective and long-term discipline

… stack up?

It has certainly been an interesting ride with four share market drops of more than 10% and two where the fall went past 20%. But global financial crises, a global pandemic and geopolitical events like war in Ukraine affected a lot more than just our investment portfolios.

Yet when looked at through the timeframe of two decades, the value of taking a long-term view is the lesson that really jumps out. Because as dramatic as the GFC and the COVID pandemic were, markets adapt and adjust. And as investors, we have to accept that somewhere in the future, other significant and largely unforeseen events await us.

The good news when you look at investment returns since December 2003 to November 2022 is investors have been rewarded for the risk they have taken on.

A growth portfolio (70% growth assets/30% defensive) saw $10,000 in December 2003 deliver a 7.4% return and grow to approximately $38,700. A conservative portfolio – which enjoyed a much more stable return path with a 5.8% return was worth approximately $29,100 at the end of the same period while a high growth portfolio (90% growth assets/10% defensive) delivered return of 8.2% and was worth approximately $44,500*.

One of the challenges of this type of analysis is that we naturally gravitate to the highest return at the end of the period. Hindsight is indeed a wonderful thing.

But accepting that we cannot predict the future it brings us to the Vanguard principles of setting appropriate goals and developing a suitable asset allocation that lines up with our personal goals and risk appetite

Since December 2003 the highest performing asset class was US shares thanks to a return of 10% which would have turned an initial $10,000 investment into approximately $60,800. Australian shares, by comparison, delivered 9.0% and a value of approximately $51,200 for the same time period*.

But when you chart the return journey – and you can do this yourself using the Vanguard interactive index chart tool – you can see the investor who had 100% of their portfolio in US or Australian shares had a dramatically more volatile journey than those who opted for a diversified portfolio.

If they could handle the volatility then they enjoyed the rewards but surely one of the lessons from the past two decades is that we all need to factor in risk as well as return.

It is one of the things that makes our superannuation system so good for working Australians. The typical default super fund portfolio has a diversified mix of assets – although some have higher risk levels than others so invest the time to understand your fund’s portfolio – and particularly as you approach retirement you may want to dial the risk exposure down. A feature that the new Vanguard Super fund has built in automatically.

Age is an important factor. For folks in their twenties or thirties a high exposure to growth assets makes sense. Much less so for a 65-year-old about to transition to life after full-time work.

If there is one learning that is an absolute constant from the past 20 years, it is the need for investors to keep costs as low as possible. As Vanguard’s founder Jack Bogle was fond of saying: in investing you get what you don’t pay for.

Finally, the principle of maintain perspective and long-term discipline can at times feel a little trite. But when you look back at events like the GFC or the outbreak of COVID you realise it takes real discipline to maintain the perspective and stay the long-term course.

Which is where the value of having a written financial plan shines through because it will remind you of why you were investing in the first place, the goals that are important to you and which investing success will enable you to realise.

After almost two decades Robin Bowerman is handing over the editorial reins of Smart Investing as he is retiring from Vanguard. However, guest columns are on the agenda for 2023.

Best wishes for the holiday season and Smart Investing will return in early 2023.




Robin Bowerman
Head of Corporate Affairs

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