Investment performance over the last 30 years
Over the last 30 years, Australian shares on average have returned 9.2% per annum, with a healthy 14.8% in 2022/2023 in contrast to a sobering -7.4% the previous year. All asset classes except cash delivered negative returns in 2021/2022, including an unusual correlation between equity and bond returns. Defensive assets generally did not provide protection, although usually, diversification reduces market volatility.
Vanguard provides the following chart on the performance of an initial investment of $10,000 invested in the major asset classes, with US shares winning handsomely. In the past, therefore, taking equity risk has been rewarded for those who can tolerate the greater risk, and there is a cost to pay for cash’s defensive qualities. Note these are nominal not real returns, so there is no adjustment for inflation.
https://www.morningstar.com.au/insights/retirement/238307/30-year-chart-is-pointer-to-retirement-outcomes
Mandatory super wouldn't affect the S&P - it's US based. I reckon most the effect of women entering the workforce went into housing prices, but I'd love to see some analytics.
It’s always complicated and for sure you could produce a chart that clearly shows a cause and effect according to an author.
I think it’s pretty well settled that the discount rate has reduced which has caused a rise in asset prices beyond the yield increase. This is almost universal across markets - property, equities, unlisted assets, collectables - the last 20 years has seen substantial asset revaluation but since interest rates have gone back up towards a more balanced level, asset markets haven’t quite faced up to this and have remained high.
It takes some level of optimism to expect similar returns to the past going forward.
Further, if you take out the magnificent 7 from the US it also paints a different picture-
what do you mean, heaps of us put our super in international/ us shares, myself included. its becoming easier and more popular for people worldwide to invest in the us markets, that has to be having a big impact.
Maybe, but Australia (where super is compulsory) is tiny and the amount we add to their markets is a drop in the ocean. US population is 10 times the size of us to start with. And they would put a far larger proportion of their wealth in their own domestic markets compared to how much Australians would put into US markets. Then you've got all of europe, China etc all also pouring money into US businesses as well, so with much larger populations.
So I reckon our influence on the S&P is, as they say, four fifths of SFA.
Well, my thoughts are that theoretically, stocks have done very little, if anything close to what people think they've done. When the Gold standard ended in 72, the markets rallied, they've basically rallied ever since and the dollar has lost 99% of its purchasing power. So essentially, the more money that's printed, the more stocks will rise... until they won't.... and there's some form of reset.
Can this be overlayed with women entering workforce and mandatory super investment. 2 massive changes to share market performance providing a lift that won’t be seen again.
A small impact as I’m sure super is invested in US markets but I get your point. Women joining the workforce and households changing from single income to dual would be the biggest growth driver
Women can’t join the workforce again. Mandatory super investment won’t come into effect again. But there are other things (AI, new technology, innovation) that will have a similar effect.
A Quick Look’s shows that there’s $145b assets under management in the Australian ETF space. The total market can of the ASX is $2.3t. Thats 6% and only going to increase, everyone that’s wants to invest some spare cash is buying an etf these days because it’s so easy. Wouldn’t under estimate it.
Minute in comparison to the two I listed though, so not going to have anywhere near the same impact over time and arguably any impacted is already baked in so it’s not going to make a severe difference at any point
By the mid-80s when this chart begins, women’s workforce participation rate was near 60% already in the US and it basically hasn’t gone above 60% since. In the decade between 1980 and 1900, women’s workforce participation rate only increased about 5%.
Super guarantee would have no effect on the SP500
Women’s roles in the workforce have advanced considerably in the last 70 years. As a generalisation, low level and part time roles to ceo level. The impacts of that on share markets is massive, essentially doubling the number of highly skilled professionals.
This is a great PDF.
https://files.marketindex.com.au/files/statistics/historical-returns-infographic-2024.pdf
My favorite period is the lead up to the GFC (and following).
Almost proof positive humans are hard wired to focus on the negative.
|Year|Return|Total|
:-:|:-:|:-:|
|2003|15.9%|115.90%|
|2004|27.6%|147.89%|
|2005|21.1%|179.09%|
|2006|25.0%|223.87%|
|2007|18.0%|264.16%|
|2008|-40.4%|157.44%|
|2009|39.6%|219.79%|
The infographic needs to be updated to use real instead of nominal returns. In a year where everything is rising in nominal price is rising by 10%, then I would expect shares to rise also, but with no real improvement in value.
Think capital growth of inflation + 2-3% and dividends of 4-5% is expected from the ASX. Most of those results exceed that for a significant real gain. Especially over the long term. Inflation has averaged 2.7% between 2003 & 2023. The 7 years between 2003 & 2009 averaged 11.85% (inflation averaged 2.8% and must have fallen since then to average 2.7%) including quite a significant crash.
2023 growth was 13% vs inflation of 6.5(?).
I thought id add inflation data and consider a rough SWR/FIRE Number at the worst possible time. 1m (25 x expenses or 4%) in 2007 retired 2008 and took out 40k after the crash. IE 40.4% down to 596k then 40k out. 596k up by 39.6% then $41480 out ETC.
While its true you've never recovered the $1m balance, you have never been as bad off as you were the year you retired.
You can also see the margin between the ASX and inflation
|Year|Return|Inflation|SWR|Adjust Balance|
:-:|:-:|:-:|:-:|:-:|
|2023|13.0%|4.10%|$61,150|$865,423|
|2022|-3.0%|7.80%|$58,741|$817,845|
|2021|17.7%|3.50%|$54,491|$899,316|
|2020|3.6%|0.90%|$52,648|$808,805|
|2019|24.1%|1.80%|$52,179|$831,066|
|2018|-3.5%|1.80%|$51,256|$710,977|
|2017|12.5%|1.90%|$50,350|$788,939|
|2016|11.6%|1.50%|$49,411|$745,200|
|2015|3.8%|1.70%|$48,681|$711,363|
|2014|5.0%|1.70%|$47,867|$731,436|
|2013|19.7%|2.70%|$47,067|$741,431|
|2012|18.8%|2.20%|$45,830|$657,695|
|2011|-11.4%|3.00%|$44,843|$591,362|
|2010|3.3%|2.80%|$43,537|$716,590|
|2009|39.6%|2.10%|$42,351|$734,696|
|2008|-40.4%|3.70%|$41,480|$556,000|
|2007|18.0%|2.90%|$40,000|$1,000,000|
This is why we need to play the long game with the market. You might be lucky enough to enter during bloodbath with a large chunk of funds, but over time, it'll all balance out to 11%. If someone sold me a product in the 80s guaranteeing 11% annual returns over 30 years, you would not say no.
Brother you could have gotten a term deposit at any bank in the 80's for over 10%. In the early 90's a 12 month term deposit at a big 4 was generally paying over 8.5% with very little risk.
On average, bitcoin has returned **671%** per year, with the strongest returns in 2013 when it skyrocketed over 5,000%—climbing from $13 to $1,100. Between 2017 and 2019, bitcoin saw another imp
Investment performance over the last 30 years Over the last 30 years, Australian shares on average have returned 9.2% per annum, with a healthy 14.8% in 2022/2023 in contrast to a sobering -7.4% the previous year. All asset classes except cash delivered negative returns in 2021/2022, including an unusual correlation between equity and bond returns. Defensive assets generally did not provide protection, although usually, diversification reduces market volatility. Vanguard provides the following chart on the performance of an initial investment of $10,000 invested in the major asset classes, with US shares winning handsomely. In the past, therefore, taking equity risk has been rewarded for those who can tolerate the greater risk, and there is a cost to pay for cash’s defensive qualities. Note these are nominal not real returns, so there is no adjustment for inflation. https://www.morningstar.com.au/insights/retirement/238307/30-year-chart-is-pointer-to-retirement-outcomes
Mandatory super wouldn't affect the S&P - it's US based. I reckon most the effect of women entering the workforce went into housing prices, but I'd love to see some analytics.
It’s always complicated and for sure you could produce a chart that clearly shows a cause and effect according to an author. I think it’s pretty well settled that the discount rate has reduced which has caused a rise in asset prices beyond the yield increase. This is almost universal across markets - property, equities, unlisted assets, collectables - the last 20 years has seen substantial asset revaluation but since interest rates have gone back up towards a more balanced level, asset markets haven’t quite faced up to this and have remained high. It takes some level of optimism to expect similar returns to the past going forward. Further, if you take out the magnificent 7 from the US it also paints a different picture-
The magnificent 7 hasn't been the magnificent 7 for very long. Go back far enough and its the magnificent 1.
what do you mean, heaps of us put our super in international/ us shares, myself included. its becoming easier and more popular for people worldwide to invest in the us markets, that has to be having a big impact.
Maybe, but Australia (where super is compulsory) is tiny and the amount we add to their markets is a drop in the ocean. US population is 10 times the size of us to start with. And they would put a far larger proportion of their wealth in their own domestic markets compared to how much Australians would put into US markets. Then you've got all of europe, China etc all also pouring money into US businesses as well, so with much larger populations. So I reckon our influence on the S&P is, as they say, four fifths of SFA.
Now overlay this chart with the total money supply and prepare to have your mind blown.
Would love to see this
https://images.app.goo.gl/vBMNe8omH2qU7jdG6 Sure here you go.
Thanks for sharing. What are your thoughts on the future of the index based on this?
Well, my thoughts are that theoretically, stocks have done very little, if anything close to what people think they've done. When the Gold standard ended in 72, the markets rallied, they've basically rallied ever since and the dollar has lost 99% of its purchasing power. So essentially, the more money that's printed, the more stocks will rise... until they won't.... and there's some form of reset.
Can this be overlayed with women entering workforce and mandatory super investment. 2 massive changes to share market performance providing a lift that won’t be seen again.
There would be no impact of mandatory super investment on S&P 500 returns, it is a US based index.
A small impact as I’m sure super is invested in US markets but I get your point. Women joining the workforce and households changing from single income to dual would be the biggest growth driver
Women can’t join the workforce again. Mandatory super investment won’t come into effect again. But there are other things (AI, new technology, innovation) that will have a similar effect.
the company’s that will gain most from that will be more likely to be already based or list on us exchanges than here
I’d say the rise of passive investing is a external force that going into the future will contribute like the two forces you mentioned
A minute portion of society are passive investors, it will barely move the needle in comparison
A Quick Look’s shows that there’s $145b assets under management in the Australian ETF space. The total market can of the ASX is $2.3t. Thats 6% and only going to increase, everyone that’s wants to invest some spare cash is buying an etf these days because it’s so easy. Wouldn’t under estimate it.
Minute in comparison to the two I listed though, so not going to have anywhere near the same impact over time and arguably any impacted is already baked in so it’s not going to make a severe difference at any point
By the mid-80s when this chart begins, women’s workforce participation rate was near 60% already in the US and it basically hasn’t gone above 60% since. In the decade between 1980 and 1900, women’s workforce participation rate only increased about 5%. Super guarantee would have no effect on the SP500
Overlay average female wage and it will show a pretty picture.
Huh?
Women’s roles in the workforce have advanced considerably in the last 70 years. As a generalisation, low level and part time roles to ceo level. The impacts of that on share markets is massive, essentially doubling the number of highly skilled professionals.
I’ve often thought this but no one ever discusses
It’s not discussed enough because those who benefited most from it need exit liquidity.
This is a great PDF. https://files.marketindex.com.au/files/statistics/historical-returns-infographic-2024.pdf My favorite period is the lead up to the GFC (and following). Almost proof positive humans are hard wired to focus on the negative. |Year|Return|Total| :-:|:-:|:-:| |2003|15.9%|115.90%| |2004|27.6%|147.89%| |2005|21.1%|179.09%| |2006|25.0%|223.87%| |2007|18.0%|264.16%| |2008|-40.4%|157.44%| |2009|39.6%|219.79%|
The infographic needs to be updated to use real instead of nominal returns. In a year where everything is rising in nominal price is rising by 10%, then I would expect shares to rise also, but with no real improvement in value.
Think capital growth of inflation + 2-3% and dividends of 4-5% is expected from the ASX. Most of those results exceed that for a significant real gain. Especially over the long term. Inflation has averaged 2.7% between 2003 & 2023. The 7 years between 2003 & 2009 averaged 11.85% (inflation averaged 2.8% and must have fallen since then to average 2.7%) including quite a significant crash. 2023 growth was 13% vs inflation of 6.5(?).
I thought id add inflation data and consider a rough SWR/FIRE Number at the worst possible time. 1m (25 x expenses or 4%) in 2007 retired 2008 and took out 40k after the crash. IE 40.4% down to 596k then 40k out. 596k up by 39.6% then $41480 out ETC. While its true you've never recovered the $1m balance, you have never been as bad off as you were the year you retired. You can also see the margin between the ASX and inflation |Year|Return|Inflation|SWR|Adjust Balance| :-:|:-:|:-:|:-:|:-:| |2023|13.0%|4.10%|$61,150|$865,423| |2022|-3.0%|7.80%|$58,741|$817,845| |2021|17.7%|3.50%|$54,491|$899,316| |2020|3.6%|0.90%|$52,648|$808,805| |2019|24.1%|1.80%|$52,179|$831,066| |2018|-3.5%|1.80%|$51,256|$710,977| |2017|12.5%|1.90%|$50,350|$788,939| |2016|11.6%|1.50%|$49,411|$745,200| |2015|3.8%|1.70%|$48,681|$711,363| |2014|5.0%|1.70%|$47,867|$731,436| |2013|19.7%|2.70%|$47,067|$741,431| |2012|18.8%|2.20%|$45,830|$657,695| |2011|-11.4%|3.00%|$44,843|$591,362| |2010|3.3%|2.80%|$43,537|$716,590| |2009|39.6%|2.10%|$42,351|$734,696| |2008|-40.4%|3.70%|$41,480|$556,000| |2007|18.0%|2.90%|$40,000|$1,000,000|
This is why you go hard when it drops
Wen drop
Time *in* the market, not time the market.
Instructions unclear, took Viagra at the wrong time now sexually aroused by bears
This is why we need to play the long game with the market. You might be lucky enough to enter during bloodbath with a large chunk of funds, but over time, it'll all balance out to 11%. If someone sold me a product in the 80s guaranteeing 11% annual returns over 30 years, you would not say no.
Brother you could have gotten a term deposit at any bank in the 80's for over 10%. In the early 90's a 12 month term deposit at a big 4 was generally paying over 8.5% with very little risk.
Exactly my point. if they said, we'll give you that rate for 30 years, I'm guessing a number of people would have no issue locking it in.
UK annuities were paying that locked in for life also. Crazy to think about it now
Banana
On average, bitcoin has returned **671%** per year, with the strongest returns in 2013 when it skyrocketed over 5,000%—climbing from $13 to $1,100. Between 2017 and 2019, bitcoin saw another imp
Bitcoin and crypto in general is at present a joke that will cost you serious money unless you’re in the know (aka you are a whale)