Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 318

Vital lessons from the long-term Index Chart

Information overload is a modern day problem.

Between smartphones, websites and watches that alert you even when you have ignored the phone, it is hard, if not impossible, to tune out the noise of the world. Trade wars, Brexit, currency slumps and geopolitical tensions are just the headlines that can dominate the news cycle on any given day. Thankfully the Australian cricket team provided some welcome relief – and restored a little national pride – at Edgbaston this week.

A long-term look at markets

Vanguard has been publishing its annual index chart that plots the performance of all the major markets and asset class indices for Australian investors for 18 years. It allows investors to look at how markets have rewarded them for the risk taken through periods of market rises and periodic slumps.

This year’s chart provides the data to 30 June 2019, and naturally there is always a tendency to focus on what has topped the performance table. While interesting, that is not the key message from the chart.

The core message – and the reason for continuing to publish it over such an extended period of time – is to understand the power of markets over the long-term.

Think of a major event that roiled investment markets and look at that point on the chart, say, the last Australian recession in 1992 or the collapse of Lehman Bros in 2008 to understand its impact at the time. Then zoom out to see how it affected returns over the full 30-year time period covered by the chart.

The other message provided by the index chart is when investors lean towards wanting to predict what will be the top performing asset class next year … and the year after that.

You can view the digital version of the chart here (or order a print copy here) but if you are tempted to try and time markets, it’s worth taking a look at the table below from the index chart brochure which shows the total returns across all the major asset classes featured in the chart.

No discernible performance pattern

The best and worst performing asset classes are highlighted across each year, and feel free to let us know if you spot a performance pattern because what we see is what Burton Malkiel captured so elegantly in his investment classic, A Random Walk Down Wall Street.

The index chart shows the performance of markets over the long term, but for individual investors its value is in understanding how you blend all of those markets to create a portfolio with the right asset allocation to achieve your investment goals within a risk level that you are comfortable with.

For investors, a sense of perspective is a critical tool in the armory that can help tune out short-term noise, focus on your long-term goals and, as the legendary founder of Vanguard, Jack Bogle said, help you to “stay the course”.

 

Robin Bowerman is Principal and Head of Corporate Affairs at Vanguard Australia, a sponsor of Cuffelinks. This article is for general information and does not consider the circumstances of any individual.

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

 

3 Comments
Trevor
August 08, 2019

If the house is your residence then you need to factor in the value of living in it rent free and the tax free status of the capital appreciation.

Work out how much rent you would have paid (out of after tax income) over the years and add that to the capital appreciation of the property and it starts looking like a pretty good investment.

Also non financial benefits such as not having to deal with a landlord or being forced to move need to be factored in.

For what its worth I think negative gearing property investments is overrated.

Kevin
August 08, 2019

Depends what you mean by property Steve,it doesn’ t mean a house.World REITS excluding Australia,all dividends reinvested.

To get an idea take an investing life of 40 years,you started early.The accumulation index gives a value of 70K now approx.Take an average house in 1980 in my state and it was roughly $40K.

That 40K put into shares would now be $2.8 million.Of course the management fees would also be a lot over those decades and greatly reduce that return.

The house is around $400K now,the holding,insurance and repairs and maintenance costs of a property are huge.The rent cannot be reinvested.

Take out the reinvesting of dividends and the index would need to be multiplied by 80.So 80 x 6500 would be 520K.Not taking out costs etc.

Just my 2 cents worth,I don’ t understand why people think investing in houses is wonderful.
Investing in REITS by all means,but they are volatile.

Steve
August 07, 2019

The most useful part of this wonderful chart is the long term average return at the bottom. Property is the long term winner (barring US shares which have been through a ridiculous bull market)

 

Leave a Comment:

banner

Most viewed in recent weeks

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

Super crosses the retirement Rubicon

Australia's superannuation system faces a 'Rubicon' moment, a turning point where the focus is shifting from accumulation phase to retirement readiness, but unfortunately, many funds are not rising to the challenge.

Latest Updates

Investment strategies

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Superannuation

Meg on SMSFs: Indexation of Division 296 tax isn't enough

Labor is reviewing the $3 million super tax's most contentious aspects: lack of indexation and the tax on unrealised gains. Those fighting for change shouldn’t just settle for indexation of the threshold.

Shares

Will ASX dividends rise over the next 12 months?

Market forecasts for ASX dividend yields are at a 30-year low amid fears about the economy and the capacity for banks and resource companies to pay higher dividends. This pessimism seems overdone.

Shares

Expensive market valuations may make sense

World share markets seem toppy at first glance, though digging deeper reveals important nuances. While the top 2% of stocks are pricey, they're also growing faster, and the remaining 98% are inexpensive versus history.

Fixed interest

The end of the strong US dollar cycle

The US dollar’s overvaluation, weaker fundamentals, and crowded positioning point to further downside. Diversifying into non-US equities and emerging market debt may offer opportunities for global investors.

Investment strategies

Today’s case for floating rate notes

Market volatility and uncertainty in 2025 prompt the need for a diversified portfolio. Floating Rate Notes offer stability, income, and protection against interest rate risks, making them a valuable investment option.

Strategy

Breaking down recent footy finals by the numbers

In a first, 2025 saw AFL and NRL minor premiers both go out in straight sets. AFL data suggests the pre-finals bye is weakening the stranglehold of top-4 sides more than ever before.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.