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.

 

  •   6 August 2019
  • 3
  •      
  •   
3 Comments
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)

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.

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.

 

Leave a Comment:

banner

Most viewed in recent weeks

How to minimise tax with a will

Inheritance tax implications in Australia may surprise some, as poor estate planning without proper wills or trusts can lead to costly tax bills and delays for beneficiaries.

Testamentary trusts post-budget: Estate planning, tax reform and the ‘death tax’ debate

Proposed Budget changes to taxation are casting new uncertainty over testamentary trusts, prompting closer scrutiny of estate planning structures and the real implications of reforms still taking shape.

Meg on SMSFs: The CGT changes don’t impact super but what about Div 296 tax decisions?

New CGT rules could tip the scales in the super vs non-super debate. For those facing the Division 296 tax, the case for withdrawing has gotten more complex. A "comparison rate" tool may help assess decisions.

High quality businesses are on sale

Beneath the dominance of the ASX's largest stocks, much of the market has been left behind. High-quality companies are now trading at levels rarely seen, offering opportunities for investors willing to look deeper.

The investment mistake killing your returns

Retail investors face an increasingly complex product environment, but simplicity may be the most overlooked advantage in building a portfolio you can actually live with.

The strange effect of the 30% minimum capital gains tax

The 30% minimum tax on capital gains sits at the heart of the budget's proposed reforms. Yet the mechanics reveal anomalies that introduce unexpected distortions that raise questions about its design.

Latest Updates

SMSF strategies

Meg on SMSFs: How wide is the ban on LRBAs?

The government's recent deal with the Greens has put SMSF property borrowing on the chopping block. The change raises tricky questions about timing, exceptions and what SMSFs will still be able to buy.

Shares

Why Australian shares are falling behind the world

Australia’s market boasts a long record of outperformance, but recent results tell a different story. Is the ASX’s lagging performance a temporary setback or evidence that structural forces will keep global markets ahead?

Taxation

The strange effect of the 30% minimum capital gains tax

The 30% minimum tax on capital gains sits at the heart of the budget's proposed reforms. Yet the mechanics reveal anomalies that introduce unexpected distortions that raise questions about its design.

Shares

The next phase of Australian equity leadership

For years, banks have powered Australian sharemarket returns. But changing economic conditions, stretched valuations and global trends suggest the next generation of winners may not be found in familiar domestic sectors.

Economy

Global market growth hinges on Iran War and AI rollout

Global growth is facing mounting pressure from war, higher oil prices, inflation and trade tensions. But a wave of AI-related investment may prove powerful enough to support economic activity and reshape the outlook for markets.

Retirement

The retirees who can't spend

Why do so many retirees pass away with their wealth intact? Conventional wisdom blames pension rules for the reluctance to spend, but a case study from New Zealand shows that the answer may not be as predictable.

Investment strategies

Here’s my investment philosophy. What’s yours?

Investors often hear they need an “investment philosophy,” yet few know what that really means. Beneath the jargon sits a simple idea: a handful of core beliefs that shape every financial decision, for better or worse.

Sponsors

Alliances

© 2026 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.