THERE'S great Warren Buffett quote: "I buy (shares) on the assumption that they could close the market and not reopen it for five years".
It's good advice, evidenced by Vanguard's 30-year index chart, released earlier this month. The chart tracks the growth over a 30-year time frame of a $10,000 investment. So had you invested $10,000 30 years ago and reinvested all income, you could now have:
• $268,733 if invested in Australian shares; • $190,702 if invested in US shares; • $168,900 if invested in listed property; • $105,786 if invested in cash.
While the chart demonstrates the value of long-term investing, it also shows the value of following a broad trend rather than focusing specifically on any one fad.
What do I mean? Well the Australian shares result above is calculated on the S &P/ASX All Ordinaries Accumulation index. This index represents the 500 largest companies listed on the ASX - but over the past 30 years the top five hundred companies have changed. Some examples are the float of the Commonwealth Bank, of Woolworths, of Telstra and the various airlines.
So the biggest trends in the next decade? Same as before. Property and shares. Property will do well because everyone loves it and it receives government support. Shares will do well because they represent our economic achievements. Which ones? It doesn't matter. Follow the trend and ignore the hysteria.
Justine Davies is finance editor and commentator with financial research...