Investing with a marathon mindset

By Vanguard

Investing strategy

Why the best chance of investment success is about endurance and discipline

Imagine standing at the starting line of a marathon. You’re not thinking about the first kilometre.

Instead, you’re focused on the long road ahead, pacing yourself, conserving energy, and staying mentally strong. That’s also the mindset of seasoned investors.

Too often, investing can be mistaken for a sprint – a race to quick profits, fast trades, and quick wins. But just like sprinting through the first few kilometres of a marathon can lead to burnout, chasing short-term market gains can derail your financial journey.

Markets are unpredictable and are often swayed by headlines, emotions, and economic shifts. Trying to outrun these fluctuations by timing markets often leads to stress and poor decisions. Most people get it wrong, which results in negative outcomes for long-term returns.

Long-term investing, on the other hand, is all about endurance. It’s about setting a steady pace, staying committed, and trusting the process. Over time, compounding returns begin to work their magic, and the ups and downs of the market smooth out.

“Bear markets and corrections are a part of life for investors, who are best served by maintaining a long-term focus,” says Vanguard’s Chief Investment Officer, Asia-Pacific, Duncan Burns.

“The share market has delivered long-term average rates of return between 7-10% over long periods of time. But those returns only measure what buy and hold investors would earn by putting money in and keeping their money invested through good times and bad.

While bear markets can be daunting, on average they have lasted much shorter than bull markets and have had far less of an effect on long-term performance.

Taking a 30-year view

The 2025 Vanguard Index Chart tracks the courses of six major asset classes between 1 July 1995 and 30 June 2025 – Australian shares, United States shares, international shares (excluding Australian shares), listed Australian property securities, Australian bond securities, and cash.

Each asset class represents the return from a specific market index or reflects official data. For example, the average annual returns below for United States shares are based on the return from the S&P 500 Total Return Index (in Australian dollars). The data sources for each asset class are detailed below the table.

Keep in mind that the numbers in the tables below represent total investment returns. That is, they assume all investment income earned from an investment fund over time was reinvested back into units in the same fund. The returns numbers also exclude any acquisition costs, fees and taxes.

Past performance is not a reliable indicator of future performance, and actual investment outcomes may vary due to fees, taxes, market conditions and other factors.

How different asset classes have performed

Asset class	Average annual return (%)
	1 year	5 years	10 years	20 years	30 years
U.S. Shares¹	17.4	17.8	15.5	11.6	10.8
Australian Shares²	13.2	12.0	9.1	8.0	9.3
International Shares³	18.6	15.8	12.5	9.3	8.3
Australian Listed Property⁴	14.0	12.4	8.3	5.4	8.0
Australian Bonds⁵	6.8	-0.1	2.3	4.3	5.5
Cash⁶	4.4	2.3	2.0	3.4	4.1

^{Data as at 30 June, 2025. Sources: Bloomberg Finance L.P., MSCI Inc., Standard & Poor’s, WM Reuters, 1 S&P 500 Total Return Index (in AUD), 2 S&P/ASX All Ordinaries Total Return Index, 3 MSCI World ex-Australia Net Total Return Index AUD Index, 4 S&P/ASX 200 A-REIT Total Return Index, 5 Bloomberg AusBond Composite 0+ Yr Index and Bloomberg AusBond Bank Bill Index, 6 Reserve Bank of Australia’s Official Cash Rate.}

Beyond showing the constant ups and downs of investment markets over time, the Vanguard Index Chart shows how a starting balance of $10,000 would have grown in value over 30 years after hypothetically being invested into the indexes which track each asset class.

An index benchmark is a list of securities, like shares or bonds, representing the whole market or a segment of the market.

While it is not possible to invest in an index itself, there are exchange traded funds (ETFs) that have been designed to track the returns of these specific indexes.

An index fund attempts to replicate an index as closely as possible by investing in the securities that comprise the index. So, when you invest in the “whole market” through broad-based diversified index funds and ETFs, you gain exposure to the growth of local and global economies.

A long distance run

Asset class	Average annual return since 1 July 1995 (%)	Value at 30 June 2025 of $10,000 invested on 1 July 1995
U.S. Shares	10.8	$214,332
Australian Shares	9.3	$143,786
International Shares	8.3	$109,132
Australian Listed Property	8.0	$99,911
Australian Bonds	5.5	$49,451
Cash	4.1	$33,677

With an average total annual return of 10.8%, a $10,000 investment in the top 500 U.S. companies at 1 July 1995, when measured by the S&P 500 Total Return Index (in Australians dollars), would have grown to $214,332 by 30 June 2025. That’s a total compound return of more than 2,000% without an investor having made any additional investments beyond the initial $10,000 in 1995, other than by reinvesting all the income distributions that they received over time.

A $10,000 investment in the Australian share market over the same time period, when measured by the S&P/ASX All Ordinaries Total Return Index, would have increased to $143,786 based on the same strategy of reinvesting all the income distributions. That represents a 9.3% per annum average annual return over the 30-year period, and a total compound return of more than 1,300%.

The lowest long-term return over three decades has been from cash. When measured by the Reserve Bank of Australia’s Official Cash Rate, it would have earned just 4.1% per annum and grown to $33,677. This is around $180,000 less than an investment in the broad U.S. share market and about $110,000 below the return from an investment in the broad Australian share market. Even still, the total compound return from cash would have been around 237% based on a $10,000 initial investment.

Why diversification matters

Asset class returns are rarely consistent. The best-performing asset class one year can be the worst in the following year.

In the 2024-25 financial year for example international shares outperformed all other asset classes, achieving a return of 18.6%.

In 2023-24 it achieved a return of 19.9%, which was below the 24.6% return from Australian listed property and the 24.1% return from U.S shares.

Each asset class has experienced years of best performance and worst performance, with no clear pattern, therefore making it impossible to pick which asset class will be next year’s winner.

This demonstrates the importance of having a diversified mix of investments across multiple asset classes.

“The longer you hold a balanced portfolio, the more likely you are to experience positive performance,” Mr. Burns adds.

“Over a 10-year holding period, a portfolio of 60% stocks and 40% bonds hasn’t had a negative nominal return and has had significantly less likelihood for negative real returns compared with shorter holding periods.”

Just as marathon runners train with consistency and discipline, long-term investors build wealth by sticking to a plan, diversifying their portfolios, and by staying on their course regardless of market conditions.

Any investment is subject to investment and other known and unknown risks, including possible delays in repayment and loss of income and principal invested.

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^{We have not taken your objectives, financial situation or needs into account when preparing this article so it may not be applicable to the particular situation you are considering. You should consider your objectives, financial situation or needs, and the disclosure documents for the product before making any investment decision. Before you make any financial decision regarding the product, you should seek professional advice from a suitably qualified adviser. A copy of the Target Market Determinations (TMD) for Vanguard’s financial products can be obtained on our website free of charge, which includes a description of who the financial product is appropriate for. You should refer to the TMD of the product before making any investment decisions. You can access our Investor Directed Portfolio Service (IDPS) Guide, Product Disclosure Statements (PDS), Prospectus and TMD at vanguard.com.au and Vanguard Super SaveSmart and TMD at vanguard.com.au/super or by calling 1300 655 101. Past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance.}

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