Interesting paper - accumulation index returns 1888-1987

Hi all,

This may have already come up before, but I found this and thought it was very interesting. An academic from the University of Melbourne did a by-decade breakdown of how Australian shares have performed each decade from 1888-1987:

https://www.finsia.com/docs/default-source/jassa-new/jassa-2006/3_2006_equity_returns.pdf?sfvrsn=6

The key highlight for very long term investors:

"In 1962, W.D. Owen used historical data over the period 1883–1960 to estimate the total return from Australian equities at 11.5% per annum. He was concerned with an estimate of future long-term returns. Using information that subsequently became available, this estimate should be reduced to 9.5% per annum to allow for his use of unweighted dividend yields. In the 45 years that have elapsed since this paper was written, the geometric mean return has been 10.8% per annum. It is remarkable that an estimate made 45 years ago with the data then available turns out to have been in the right ball-park."

It shows how an index tracking LIC/ETF for very long term investment should be a pretty sound and quite consistent investment despite the short/medium term fluctuations.

 

Only half of the people can beat an index.

Put in costs and the number is lower.

I love indexing.

 

Everyone as a whole can only get market returns minus costs. The split above and below (before costs) doesn't need to be 50/50.

 

Yep, trading is expensive, trying to time the market can be expensive and taxes and costs can drag on performance