No one can reliably predict how a particular asset class will perform in any given year. Financial markets do not move in concert with one another; individual asset classes (cash, fixed income and equities) will perform differently in any given year and at any time one asset class may be leading the market while others lag.
As you can see in the chart below, there were years when equities led market returns and years when fixed income led the market. There were also periods when the lowest performer from one year went on to lead the market the next year. Cash has never led the market in any one-year period over the past decade; however, it is also the only asset class to have never experienced a negative return.
Markets will always go up and down in the short term. Investing in a diversified mix of equities, fixed income and cash can help steer you through every market condition and help protect you from short-term market declines. Assets that increase in value can compensate for others that may be standing still or decreasing, thereby helping to reduce risk and smooth out the returns in your portfolio over the long term.
Click the buttons below to see how different asset classes have performed over time.
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All returns are total returns in Canadian dollars, unless otherwise noted. Balanced Portfolio represented by 2% Cash, 38% Canadian Bonds, 15% Canadian Equities, 25% U.S. Equities, 15% International Equities and 5% Emerging Market Equities.
Talk to your advisor about how you can diversify your portfolio or learn about how you can diversify with fixed income.