Most financial planners will agree that asset allocation is the most significant investment decision most investors face. It’s one of those decisions which will greatly influence your net wealth in twenty, thirty years’ time. And yet, many investors give it minimal or no thought. However, by getting your asset allocation right up-front, you are positioning yourself to be able to weather future storms and to reach your long-term financial goals. As the famous quote goes: ‘To be a winner, you must plan to win, prepare to win, and expect to win.’

When determining an appropriate asset allocation mix for your individual circumstances, there are two key inputs to be decided: your time horizon (usually determined by your age), and your risk tolerance (usually determined by your age and personality). Younger investors will generally have a longer time horizon and a higher risk profile than older investors.

So where does property fit in the time horizon and risk profile spectrums? In terms of returns, Russell Investment’s Long-Term Investing Report shows Australian residential property has averaged a 10.5% p.a. gross return between 1995 and 2015. As an asset, residential property is clearly a growth asset rather than a defensive one, and that’s also reflected in the occasional market downturns we’ve seen over the long term. As a result, younger investors are generally well-matched to a high property asset allocation with a long term investment horizon, whilst older investors may want to gradually lighten their property exposure as their investment time horizon shortens. However, it’s important to remember that everyone’s situation will be specific to them.

Landen’s Director Jim Dionysatos agrees younger investors are particularly well-matched to property investing: ‘Residential property investment demand is particularly strong from buyers in their twenties, thirties and forties. And for good reason: there are few assets which offer the potential to generate such strong long-term risk-adjusted returns.’