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A steady road to getting rich

The lists of Australia’s wealthiest individuals and families published annually by different media organisations are generally an interesting read.

Ranking them by their net wealth, they show that many of the richest Australians have progressively become richer over time through a combination of business expansion, market forces and shrewd investment decisions.

In fact, looking at the aggregate data compiled over the last five years alone, the estimated combined wealth of the top 200 wealthiest people in Australia has jumped by around 50% to over $670 billion.

Australia’s top ranks include individuals involved in resources, property, information technology, and investing. One could describe them as a diversified group of investors.

Yet, the real story behind the rich list rankings only becomes apparent when one digs a little deeper and compares how individual fortunes have changed from year to year.

The overall numbers have continued to increase, but the wealth gains by individuals have certainly not been uniform over time. In fact, among the top rankings, individual wealth levels have tended to shift up and down by billions of dollars from year to year.

Some individuals and families have managed to increase their fortunes every year, without fail. But others, because of unfavourable market conditions, poor investment decisions or a combination of both, have suffered losses over the same time and slipped down the overall rankings. Some have even fallen off the rich list entirely.


Source: Wikipedia, Financial Review Rich List [https://en.wikipedia.org/wiki/Financial_Review_Rich_List]

With the benefit of hindsight, those people may have chosen to do things differently.

Following a managed investment strategy

For example, as contrarian as it may sound, had the latter cohort – those who have slipped down or off the wealth rankings entirely – simply adhered to a managed investment strategy over the last five years instead of pursuing their business interests, their net worth now may actually be higher than it was in May 2020.

And the numbers supporting this strategy are even more compelling over longer periods of time, thanks to the compounding growth on global share markets.

To illustrate this point, let’s compare the unit price returns over five years of three different Vanguard equities-based exchange traded funds (ETFs) based on an initial $10,000 investment back in April 2020.

They are the Vanguard Australian Shares Index ETF (VAS), the Vanguard MSCI Index International Shares ETF (VGS), and the Vanguard U.S. Total Market Shares Index ETF (VTS).

These particular ETFs have been chosen for illustrative purposes only because each closely tracks the broad performances of share markets in different parts of the world.

Here are the results, with the table below showing what a $10,000 investment made in May 2020 , during the early days of the COVID-19 pandemic, would have been worth on the Australian Securities Exchange (ASX) at 31 May 2025.

This data is based on each fund’s month-end net asset value (NAV), which is the value of its investments divided by the number of units in the fund. NAV movements give a good indicator of the historical performance of a fund, but they won't exactly match the returns you see as an investor. That's because your performance experience is based on the buy price (the price at which you buy into a fund) and the sell price (the price at which you sell).

The unit price returns exclude income distributions that were received by investors over the period.

Staying the course

What the numbers demonstrate is that, over the last five years, many investors using broad-based index funds that invest in different equities markets would have been well ahead by now, even without making any additional investments along the way.

Inputting higher initial deposit numbers, making regular investments in the same ETFs, and the reinvestment of distributions would obviously have produced even more impressive total returns.

And keep in mind that the last five years has included significant volatility following COVID and during the more recent economic, geopolitical and trade events.

The Vanguard Index Chart provides a much longer perspective over the last 30 years, showing the growth of different investment classes and how a starting balance of $10,000 would have changed in value after being invested into each asset class.

It’s a valuable lesson that at least some Australian rich listers have taken on board. In addition to expanding their business interests, it has been reported certain individuals have been investing heavily into ASX-listed and foreign-listed ETFs.

One could say they are hedging their investment bets.

 

Tony Kaye is a Senior Personal Finance writer at Vanguard Australia, a sponsor of Firstlinks. This article is for general information purposes only and does not consider the investment objectives, financial situation or needs of any individual.

For more articles and papers from Vanguard Investments Australia, please click here.

 

10 Comments
Kevin
June 29, 2025

Almost 10 years of 'you can't do that', 'those companies will go bust'. The Vanguard chart explains exactly what people refuse to see and don't want to know about.
Compounding.
I found the margin loan statement for 30/6/16.I'd put them back into the plastic protector in the wrong order. It is 2016 purely because the margin loan was taken out around 1995 or 1996. So 10 year periods from then on.That first statement is the start of the 10 year period we are in now. The 3 big drivers and NAB . All 30/6/16 start date
CBA $74.37 each
Macbank $68. 90 each
WES $40.10.

NAB ( head in hands ) $25.43 each .

Spin outs were Macbank spun out Sydney airport,that may have been earlier than 2016,SYD isn't on the list because I just told them to sell them.
WES spun out Coles, so that price would need to be added to the WES price.The spin out was 1 for 1.
NAB spun out Virgin money on a 1 for 4 basis.
So in 9 years you've tripled your money on those 4 shares easily.

I'm nearly certain somebody said compounding is the 8th wonder of the world.I wonder if those companies will be around for the rest of my life,I think they will. As the statements are mid decade they are great for 25 years periods 2000 to 2025,then 2025 to 2050.

That Vanguard chart is great to show what needs to be understood,long term compounding. As Tony said,the bigger the number is at the start,the bigger the number is at the end,I think the margin loan started at $100K for me back then,then it worked in tandem with a line of credit on a property taken out earlier than the margin loan

Steve
June 29, 2025

Divorce had a major impact on Forrest & Cannon-Brookes, not mentioned here. Also, investors in Hub24 or Pinnacle would have thrashed any Index Fund investment over the past 5 years. Index Funds are the bare minimum return one should expect.

Wildcat
June 29, 2025

As Franco points out convenient starting date, this is disingenuous.

Moreover it assumes 100% exposure to shares. This is also disingenuous. Very few people have this degree of beta risk in their portfolios. This is even less so of the very wealthy. They are typically very conservative.

The modelling also assumes zero taxation on annual income and/or realised cgt inside the trusts.

There’s nothing remotely relevant in this article other than the concept of comparing options. The actual analysis is so flawed it’s meaningless.

Kevin
June 29, 2025

It's the ideal time to start,the start of a decade.Everybody says you buy low,then they don't do that .
The years to start for this decade were 2000, 2010, 2020.A decade gives you a better picture.I'm still annoyed that companies stopped giving a 10 year history in their annual reports. The only one continuing that practice in my portfolio is Macbank,that 10 year history is great. No matter what information people are presented with the answer will always be 'you can't do that'.

Scott
June 29, 2025

Now divide those returns by either M2 or M3 and report back about ‘wealth creation’ and the cantillion effect.

Phil Kennon KC
June 27, 2025

$10,000 invested in VAS probably matches VGS and VTS returns over the period for an SMSF member in pension mode getting the benefit of 100 % franking.
So need to compare apples with apples.
Phil Kennon KC

David A
July 01, 2025

Vas 100% Franking?

Franco
June 26, 2025

Tony agree staying the course leads to compounding. However starting in May 2020 makes returns look great as this was a low point during Covid. Reminds me of something i read about the best long term results of individual investors in USA. It stated that they had passed away and no one had realised, their portfolios compounded.

Dudley
June 26, 2025

"passed away and no one had realised, their portfolios compounded": Dead men don't draw down.

Franco
June 27, 2025

True Dudley, that was an idea on the affect of compounding which does occur in Super to a large extent as its taxed at 15 % until retirement. If it Grows at 8% and you draw down 5% after retirement it will last along time.
However if you want to leave it all the children they may be a little less wealthy if you live too long.

 

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