How $10,000 investments performed over five years and why diversification matters

By Vanguard

Investing strategy

Investment diversification can help you build a resilient and balanced portfolio

Global share markets surged into record territory last year, delivering double-digit returns to many investors.

For example, investors in the broad-based Vanguard Australian Shares Index ETF (VAS) – which provides exposure to around 300 of the largest companies on the Australian Securities Exchange (ASX) – achieved a total return of 10.67%* over 2025 through the combination of capital growth and the reinvestment of all income distributions.

Returns between 1 January 2025 and 31 December 2025 were even higher for investors using exchange-traded funds (ETFs) to gain exposure to a broad spectrum of international markets.

For example, investors in the Vanguard MSCI Index International Shares ETF (VGS) – which invests in approximately 1,300 companies in around 23 different countries including the U.S, Japan, U.K, Canada, France, and Switzerland – achieved a total return of 12.58%*. This return also included capital growth and the reinvestment of all income distributions.

Yet, measuring the performance of different share markets and other asset classes over a relatively short period of time such as 12 months – as well as never being an indication of future performance – provides a very narrow perspective for investors.

Indeed, the best-performing asset class in any one year can sometimes be the worst-performing in the next year. Chasing last year’s returns is often a losing strategy, which is why diversification across investments is so important.

 

A five-year returns snapshot

To provide a longer-term returns perspective, we’ve analysed the returns from six Vanguard investment products over the five-year period from 31 December 2020 to 31 December 2025.

These products track the broad asset classes of Australian shares, U.S. shares, international shares, Australian-listed property securities, global fixed interest, and cash holdings invested in high-quality, short-term money market instruments and short-dated debt securities.

Each of the products listed in the table below includes the average annual percentage return over the five years and the total dollar return from an initial $10,000 investment assuming all investment income received over the period was reinvested back into the same fund.

To find the same returns information, click the Invest with us tab under Investments on the Vanguard website and select a Vanguard product under the categories listed under the heading “Products by asset class”.

Then click on the product’s Performance tab, which will show an overview of its returns over different time periods as well as a quick snapshot of how a $10,000 investment in the fund has grown over five years. This information is updated monthly.

Product Name	Dollar Value At 31 December 2020	Dollar Value At 31 December 2025	5-Year Return (Per Annum)
Vanguard U.S. Total Market Shares Index ETF (VTS)	$10,000	$21,392.56	16.43%
Vanguard MSCI Index International Shares ETF (VGS)	$10,000	$20,670.54	15.63%
Vanguard Australian Shares Index ETF (VAS)	$10,000	$15,955.93	9.80%
Vanguard Australian Property Securities Index ETF (VAP)	$10,000	$15,128.66	8.63%
Vanguard Cash Reserve Fund (VAN0020AU)	$10,000	$11,430.10	2.71%
Vanguard Global Aggregate Bond Index (Hedged) ETF (VBND)	$10,000	$9,374.49	-1.28%

^{Source: Vanguard.}

^{Note: Returns data measured from 1 January 2020 to 31 December 2025.} 

^{Past performance is not a reliable indicator of future performance.}

^{The returns above assume $10,000 was fully invested (and remained fully invested) in the relevant fund and that all income was reinvested. They do not make any allowance for fees, costs or taxes. All results are displayed in nominal dollars, i.e. inflation has not been taken into account. An actual investment would be subject to acquisition costs, fees and taxes.}

 

The product returns numbers shown in the table above provide a longer-term perspective on the returns from their underlying asset holdings. The total average annual returns over 10 years can also be measured in the Performance tab for most of these products, which can be shown in either a chart or table view.

To get an even longer perspective on asset class returns, it’s worthwhile checking out the annual Vanguard Index Chart. It shows the average annual returns of six major asset classes over 30 years and the estimated dollar return from an initial $10,000 investment.

The Index Chart highlights the importance of being diversified across multiple asset classes as a key strategy for building a robust and resilient investment portfolio.

 

Seven key benefits of diversification

 

1. Risk reduction

One of the primary advantages of diversification is the reduction of risk. By spreading your investments across different asset classes, you minimise the impact of a single asset’s poor performance. Diversification ensures that even if one asset class underperforms, stronger performers can help smooth our or lift your overall investment return.

 

2. Stability and consistency

Diversification helps to smooth out the volatility of the market. By investing in a mix of asset classes, you may achieve more stable and consistent returns over time. This is particularly important for long-term financial goals, such as retirement.

 

3. Opportunities for growth

Different asset classes can perform well at different times. By diversifying, you could increase your chances of capturing growth opportunities and ensure you are not missing out on potential gains from asset classes you have avoided.

 

4. Inflation protection

Some asset classes, such as real estate, can act as hedges against inflation. When the cost of living rises, these assets often increase in value, helping to preserve your purchasing power.

 

5. Flexibility and adaptability

A diversified portfolio allows you to adapt to changing market conditions and economic environments. You can adjust your asset allocation based on your risk tolerance and financial goals, ensuring that your investments remain aligned with your needs. For example, if you are nearing retirement, you might shift more of your portfolio into bonds and cash to reduce volatility risk.

 

6. Enhanced return potential

While diversification doesn’t guarantee higher returns, it can potentially enhance your overall return by taking advantage of the strengths of different asset classes.

 

7. Emotional comfort

Knowing that your investments are spread across various asset classes can help you avoid the stress and anxiety that come with putting all your eggs in one basket, making it easier to stick to your long-term investment strategy. For instance, the more consistent returns from cash and Australian bonds may provide a sense of security when more volatile assets such as shares experience volatility.

 

Conclusion

By spreading your investments across different asset classes, you can reduce risk, achieve more stable returns over the long term, and potentially increase your chances of capturing growth opportunities.

Whether you are a seasoned investor or just starting out, diversification is a strategy that can help you build a resilient and balanced portfolio, ultimately contributing to your financial success and peace of mind.

 

^{Important information}

^{Diversification is no guarantee of investment success or loss avoidance. A diversified portfolio could produce negative returns if markets fall. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your portfolio. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.} 

^{* Returns assume the shares were purchased at Net Asset Value (NAV). It does not reflect transaction costs, brokerage, bid ask spread or management cost rebates.} 

^{Past performance is not an indication of future performance.}