The warnings about past performance being no guarantee of future returns are just like health warnings on cigarettes but for some reason it is a message that is either not being received or understood. Perhaps we need a series of shocking TV ads to get the message through because time and again investors follow the "hot" performers with their hard-earned cash only to be disappointed when the next cold snap arrives.

A historical perspective does have value in investing decisions because while past performance may not be a reliable indicator of future returns it has proven to be a good indicator of the risk levels attached to various asset classes over the long term. Markets move in cycles and in the past five years there have been some big cyclical moves.

If you look through the performance tables of major asset sectors for the past five years then you very quickly get an idea of where you wanted your money to be: Australian shares delivered 9.5% a year while international shares cost investors almost 7% a year. Within the Australian market industrial shares were modest performers with 7.7% a year while resource shares was the sector really firing by delivering 19.8% each year to investors.

Property trusts were also great performers with 15.3% a year while Australian government bonds delivered a solid 6.7%.

International shares were where the big money was lost - those companies classified as "growth" stocks lost 11.5% in value each year while "value" shares were not as bad only retreating 2.5% a year.

So if you were to invest based on these medium-term performance returns you would put your money into local shares and probably load up on resource stocks and property trusts, right?

Well let us rewind to five years earlier to the five years ended June 30 2000.

For that period international shares had delivered 21.2% a year compared to Australian shares' 14.6%. Within our local market industrials were the big winners powering along at 19.2% a year while resources were desultory in comparison with 7.2% a year.

Government bonds had delivered 8.9% per annum which just underscores the role of fixed interest in a portfolio as solid, low risk diversifier.

Take the time to study the numbers above and put yourself in the position of an investor in June 2000 and June 2005 deciding where to invest $100,000.

It definitely changes the perspective when you look at the big cyclical swings we have seen.

It also underlines the dangers of taking what is real today and expecting that to continue to roll along in the future. It is also worth keeping in mind that five years is not a long-term perspective - particularly if you are saving for retirement.

Try as hard as we do no-one can accurately predict the future but the contrast in the numbers above tells us two things - it is the asset allocation decision that really drives returns while holding a well-diversified portfolio lowers the risk when market cycles shift ground significantly.