Where are you looking to invest now?

Where should you look to invest in 2016 when global growth is slow and the outlook doesn't look so crash hot.

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If you had a crystal ball and you knew what the future held for Australia, the election, property and all investments, where would you put your money?

It’s the million dollar question that all financial advisers and experts are expected to have an opinion on.

A decade ago, most of us would have said real estate, and if we’d done just that we would have done pretty well too.

Prodigy Investment Partners Executive Chairman Steve Tucker talks where he’d invest $10k to The Capital Network’s Lelde Smits.

According to Atchison Consultants, in the decade running up to December 2015, residential property produced a total return, which includes rental yield and capital growth, of 7.4 per cent per annum.

Over that period you also would have also seen property prices double.

But residential property wasn’t the best returning asset class over the last 10 years. That honor fell to investors in commercial property which delivered total returns of 8.9 per cent per annum largely as a result of the stronger income it generates from higher rents.

And if we go back 25 years, Australian shares have produced superior returns returning 10.2 per cent per year versus residential property at 9.4 per cent.

While over the same period managed funds have returned 8.5 per cent per annum and fixed interest 7.8 per cent per annum.

So if we had a crystal ball, and could look forward to 2025, what would we invest in??

I think interest rates will stay low for a long time, but increase gradually, while banks will continue to tighten their lending standards for those looking to borrow to purchase property.

Lower rates will drive down rents on all types of property, and lead to a further tightening of lending standards which will reduce the amount people can borrow resulting in lower gearing.

This will result in lower returns in all parts of the property asset class.

It is also likely to result in people being prepared to pay more for the dividends they earn on equities, which at present average approximately 5.5 per cent across the ASX 200 after the benefits of franking credits are considered.

This will result in improved returns for equities as demand for the asset class increases.

Fixed income is likely to underperform as an asset class in the next 10 years as interest rates slowly increase, but this asset class will continue to play an important role in all portfolios given it’s low volatility and capital preservation qualities.

Overall my message is, where possible don’t put all your investing eggs in one basket, think long term, and make sure the investments you make fit with the goals that you have for life.

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