Share investments’ long-term gains do not stack up globally

Share values are the same today as they were before the Global Financial Crisis, but there is a silver lining.

Australian share investors who bought for long-term capital growth in 2007 are likely to be disappointed by effectively zero gains over the past 15 years.

The All Ordinaries and ASX 200 indices – and exchange traded funds that track them – are almost exactly where they were in October 2007, just before the Global Financial Crisis carnage.

During the 15-year period, Aussie stocks have underperformed the US market, which is up 139 per cent, Britain, Japan, Germany, France, Canada, India and even our nearest neighbour New Zealand, where the NZX50 index is up 167 per cent.

However, the lacklustre performance is not as dull as it seems.

Australian shares pay higher dividends than elsewhere, and the ASX accumulation indices that track total returns including dividends have doubled since 2007. Investors who bought shares when the market more than halved in 2008 and early 2009 have done well.

Baker Young managed portfolio analyst Toby Grimm said Australia’s market was heavily exposed to resources and financial services stocks, and the unusual and protracted period of low economic growth, low inflation and low interest rates since the GFC was not good for those companies.

Global sharemarket growth had been driven by technology improvements, and “tech innovation was centred in places like the United States and Germany”, he said.

Mr Grimm said Australia had success stories in health stocks including CSL and Cochlear, “but unfortunately not enough to counteract mining and financial services”.

He noted the doubling of the ASX 200 accumulation index since its pre-GFC peak: “the power of compounding returns on dividends is enormous and underappreciated by most investors”.

The years ahead could be more positive for growth, Mr Grimm said. “Australia’s bounty of natural resources is going to be more and more desired by overseas buyers,” he said.

Catapult Wealth director Tony Catt said overall share market performance reflected its companies.

“BHP and Rio Tinto have been up and down like a yoyo, while the financials have gone nowhere in that period of time – those companies still represent about 40-50 per cent of our index,” he said.

“Diversify portfolios sectorally, and you do generally have to go offshore to get that.”

Tribeca Financial chief executive officer Ryan Watson said share dividends and rental income for real estate “should be recognised in the performance of an investment”.

Timing also impacts long-term returns. If you invested in March 2020, you could have gained about 40 per cent plus dividends.

“The All Ordinaries is up over 60 per cent over the last 10 years,” Mr Watson said.

He said diversification was a key component of good investment strategies. “We don’t have a crystal ball and therefore can’t accurately predict how any one investment class will perform.”

GLOBAL COMPARISONS

Share index growth since October 2007

India +237%

New Zealand +167%

USA +139%

Japan +65%

Germany +56%

Canada +36%

Britain +6.5%

France +1.3%

Australia -1.7%%

Singapore -5%

Hong Kong -33%

China -47%

DIVIDEND YIELDS

By country, 2021:

Australia 3.6%

Britain 3.4%

Canada 2.6%

Germany 2.3%

France 2%

China 2%

Japan 1.8%

USA 1.3%

India 1.2%

Originally published as Share investments’ long-term gains do not stack up globally