WELCOME to a new decade.
It's always worth reflecting on what has passed - and this last decade has been a time of amazing change.
Financially, we started in the throes of recovery from the global financial crisis and we are still not over the hangover.
Life expectancies continue to rise, with a matching rise in the number of people relying on welfare in retirement.
Most developed nations are struggling with a growing debt burden.
The International Monetary Fund claims that global debt increased by $55 trillion in 2018, taking total global debt to $188 trillion - equivalent to nearly 230 per cent of the global economy.
There is no quick solution in sight here.
In January 2009, the cash rate was 3.25 per cent and mortgage rates were running at around 5.25 per cent. Rates have been on a downward trend ever since, with no sign of a bottom in sight.
Share markets have performed well over the decade.
We started with the Dow Jones at 10,600 and the ASX200 at 3090.
The Dow Jones is now at 28,460, having produced an average capital gain of 10.5 per cent a year.
This is a better performance than our own ASX200, which closed at 6816 last Friday, for a 10-year compound annual return of 8.2 per cent.
But these figures don't take into account the income from shares. The Dow has a yield of around 3.4 per cent, while our ASX yields around 4.2 per cent - the ASX, however, is boosted by franking credits, which can add as much as 3 per cent a year depending on the tax status of the investor.
Residential housing has - on average - not performed as well over the last decade.
Housing is notoriously hard to measure because no two properties are identical, and yet the main indicator of value is the median house price for each capital city.
In 2009 the median Brisbane house price was $420,000; it is currently around $525,000 - a capital gain of less than 3 per cent.
If you add in a net yield of 3 per cent, it's a little under 6 per cent.
As always, the key to success in residential real estate is to buy at a rock bottom price from a vendor who is keen to sell, and then add value.
That's what we call the "worst house in the best street" approach. If you do that well, you can beat the median gain.
What does the next decade hold?
As always there will be challenges and opportunities, but shares and property should continue to perform well if interest rates stay where they are, and our population continues to grow in line with forecasts.
The above examples show the importance of being diversified, as each investment has advantages and disadvantages.
International shares should be a part of everybody's portfolio as the Australian share market represents less than 2 per cent of total world markets - by investing in international shares you gain access to a much wider range of industries.
However, international shares don't offer the benefit of franking credits, and there is always a degree of currency risk.
This has been in our favour over the last 10 years, as our dollar has fallen against the US dollar, but who knows when the tide will turn.
Index funds are fine for investing in the Australian share market, but I much prefer quality managed funds for investing internationally.
And please, don't fall into the trap of investing directly into American mutual funds or American shares. It can be a tax nightmare.
So, stick with the fundamentals, diversify your investment, keep at least three years' planned expenditure in cash, and review your assets regularly.
Here's to a healthy and prosperous 2020 and a wonderful next decade.
- Noel Whittaker is an Australian expert on personal finance and the author of Making Money Made Simple. Send your money questions to: firstname.lastname@example.org