These two investment options have been rated the strongest performers in today's volatile markets,

outstripping almost every other asset class and super fund.

Research from an analysis of investment returns shows residential property has offered the highest total returns during the past three years and cash has come in second place for the past five years.

In today's volatile economic conditions, how do you

know which investments are good investments?

It's without doubt that the toll on share markets, managed funds and commercial property has been rife in the last 12 months. Reports show these assets have fallen by up to 40 per cent, where as the nation's love affair with residential property and

cash seem to have paid off, with residential landlords sitting on a strong capital gain and having the benefit of rising rental income as population demand for housing continues to increase in the future.

People need to invest in the option that suits their risk profile, which means they have to decide if they can survive a downturn like the one we have had.

If they can't survive for a couple of years in a downturn, then the lower-risk cash option is more appropriate. However, if they are investing for the longer term then they should be able to withstand a downturn.

Residential property has been a success for investors because as a nation we have a serious shortage of residential property; in fact, we're the only country in the world to have a net shortage of accommodation for both buyers and tenants.

Residential property has proven to be the mainstay of a large number of investment portfolios, and there is a very good reason for that: over the years, property has made a lot of money for many investors.

A key thing to consider as well as choosing an option which suits their risk profile and time frames for investment is spreading your investments to reduce volatility, which often provides higher long-term results.

Sara Morrison is client services manager at South West Credit.