Returns are what it is all about as an investor.

And as we mark the end of another financial year the job of filing another year's tax return gets added to the to-do list.

Ruling the books off on another tax year is an enforced and not overly welcome bit of fiscal discipline for most of us. But it does have the intrinsic value of focusing the mind on the one number investors should value above all others - the return figure after tax and after costs.

That is the real score of an investment - it is what you get to put in the back pocket or spend in retirement.

Tax typically represents the biggest cost impact on any investment's net return - which is why some investors have been known to obsess about minimising the tax bill to the detriment of other fundamental investment considerations.

In the past two years the focus on after tax return figures has been understandably distracted by the impact of the global financial crisis on portfolio values and investors more concerned by tax losses than tax costs.

But a study of the performance of the main asset classes on an after tax and after cost basis by Russell Investments (commissioned by the ASX) is instructive in showing both the impact of tax over the long term and the differences between asset classes.

Dinner party conversations can be great ways to gauge people's perceptions. Try asking this question: What was the best-performing asset class over the past decade on an after tax and after costs basis?

This is not a trick question and most people will probably get the answer correct - residential property. Over 10-years to the end of December 2009 residential property delivered investors 9.5% per annum for people on the lowest marginal tax rate and 7.9% for those on the highest marginal tax rate. What may surprise though given how fresh is the memory of the GFC is that Australian shares was a relatively close second over the same period with an after tax and after cost return of 8.6% and 6.3% depending on the marginal tax rate.

And when you widen the lens for the longer term - 20 years - the rankings reverse with Australian shares outperforming all the other asset classes at the lowest and highest tax rates with a return of 9.9% p.a. and 7.8% respectively.

Over 20 years at the top marginal tax rate residential property is second with a 7.2% annual return. The 20 year returns also give us the after tax, after cost rankings for all the asset classes. Australian shares and residential property are followed in descending order by listed property (5.6%), Australian bonds (4.5%), global listed property (3.6%) and international shares (3.4%), the latter two unhedged for currency.

A key takeaway from the Russell study is that all the major asset classes have rewarded investors by beating inflation. Cash investments, however, with a return of 2.4% p.a. were below the inflation rate so investors suffered erosion of capital value as part of the price of avoiding the market volatility.

The end of this financial year has been marked by considerable market volatility and a slump in values but what the Russell study underlines is the need for investors to keep a focus on costs and the after tax returns.

Robin Bowerman is Head of Retail at index fund manager Vanguard Investments Australia. To receive this column by email each week go to www.vanguard.com.au and register with smart investing.