In a recent Moneyweb article, Patrick Cairns mentions that the poor performance of the local stock market over the last five years has led many investors to consider moving away from equity unit trusts. Many have preferred the perceived security of money market funds, where returns have been higher.
He shares that between 1 July 2014 and 30 June 2019, the money markets around 7% per year. Furthermore, according to figures from Morningstar, only four out of the 96 local equity funds with track records that long performed better than that. The average equity fund returned only 3.5% per year over this period.
“At face value, it therefore would seem that the money market has obviously been the better place to be invested. Every money market fund in the country outperformed the average equity fund”, Cairns states. However he cautions that investors should be watchful about making simple comparisons when looking at returns from different asset classes. “The reason is that the form of this growth is different, and therefore how it is taxed is different. And that can have a significant impact on returns”, he further emphasises.
The article further unpacks a few examples to showcase his thinking. Click here to read more.
