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

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

Latest Updates

Retirement

Supercharging the ‘4% rule’ to ensure a richer retirement

The creator of the 4% rule for retirement withdrawals, Bill Bengen, has written a new book outlining fresh strategies to outlive your money, including holding fewer stocks in early retirement before increasing allocations.

Shares

Are franking credits worth pursuing?

Are franking credits factored into share prices? The data suggests they're probably not, and there are certain types of stocks that offer higher franking credits as well as the prospect for higher returns.

Retirement

Inflation cruels a comfortable retirement

ASFA’s latest estimates reveal that home-owning couples need at least $690,000 in super for a ‘comfortable’ retirement, yet only around 30% of people meet these thresholds, and the shortfall may deepen.

Australia’s sleepwalk into a damaged society

The role of family and community as foundations of a healthy society have been allowed to weaken. This has brought about Australia's spiritual decline and a thirst for dopamine that explains our high debt levels.

Investment strategies

The simplicity of this investing method hides its power

Despite the perception that successful investors nimbly navigate each zig and zag in the market, the evidence suggests otherwise. This approach can help an investor avoid self-harming their returns.

Investment strategies

Four ways that global investors are reshaping their US exposure

It wasn't long ago that investors were asking if US exceptionalism could continue. They now appear to be diversifying away from dollar assets and shifting to a more active US equity allocation.

Investment strategies

The case for high yield bonds

This is a primer on high yield bonds - their risk and returns compared to investment grade securities, diversification benefits, and strategies for selecting high yield investments for enhanced portfolio yields.

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.