What History Teaches Us About Long-Term Returns

Vanguard’s recently updated 30-year index chart is a powerful representation of how asset values have performed over the long term. It underscores why developing and implementing a well-defined strategy and maintaining discipline are crucial to your investment success.

Retirement is often referred to as your golden years, because generally speaking that’s when you have more free time to enjoy life, especially if you’re in good health and are financially secure.

However, your real golden years from a financial and investment perspective are actually those before you stop working.

That’s when you are usually earning regular income from employment. And it’s that income which ultimately provides the capital needed to build up your investment nest egg to a level where it can help you achieve a financially comfortable retirement lifestyle.

It’s impossible to calculate exactly how much money each of us will end up with at our retirement age, because there are so many variables to consider.

That comes down to investment returns over time, where we invest, and how much we invest. These all have a major bearing on the total size of our end balance when we reach our chosen retirement point.


Yet, whether you’re 25 years from retiring or even just a few years out, the 2020 Vanguard Index Chart is a powerful representation of how asset values have performed over the long term.

It underscores why having and implementing a well-defined strategy, good diversification, keeping your management costs low, and maintaining discipline, are crucial to investment success.


And it shows why even investors edging closer to their retirement age should very much be thinking in terms of long-term capital growth and the power of compounding returns.

Lessons from investing history

The divergence of investment returns

Source: Andex Charts Pty Ltd

Returns from asset classes are never consistent. As can be seen from the table above, which takes into account both the Global Financial Crisis and the most recent markets volatility stemming from COVID-19, the long-term performance stories across different asset classes is starkly different.

In 2019, for example, Australian listed property was the best-performing asset class, delivering a return of 19.3 per cent. In the year to 30 June 2020 the very same segment was the worst-performer, producing a negative return of 21.3 per cent.

Similarly, going all the way back to 1990-91, cash returned an impressive 13.5 per cent, while Australian bonds were the best-performing assets, returning 22.4 per cent. In the last financial year however, cash and Australian bonds returned just 0.8 per cent and 4.2 per cent respectively.

That’s why asset diversification is so important over the long term to spread investment performance risk.

Anyone who was solely invested in cash over the last 30 years would have achieved the lowest per annum investment returns. Cash has delivered a total annual return of 5.1 per cent since 1990, compared with the 8.9 per cent per annum return from Australian shares.


A $10,000 investment into cash 30 years ago would now be worth $44,172 – roughly a fourfold increase. By contrast, the same amount invested into Australian shares would have compounded to more than $130,000 if all dividends received had been reinvested along the way.


Accelerating your returns

Using the 30-year index chart as a benchmark, it’s clear that making additional regular incremental investments over the same time period would have supercharged your total returns.

Based on the chart’s $10,000 initial investment example and using the 8.9 per cent per annum long-term performance return from Australian shares, if you had invested an additional $250 a month over the last 30 years your investment would now be worth more than $530,000.

That’s because returns would have kept on compounding as your investment balance grew over time.

In other words, that additional $90,000 in contributions ($250 a month) would have delivered an additional $400,000 on top of the $130,000 return from a $10,000 starting investment with no additional contributions.

Even just over 10 years, using the same return percentage, additional contributions and by reinvesting dividends, that $10,000 would have increased to almost $70,000.

The bottom line

Long-term returns data proves that time in the market will deliver consistent growth over longer periods despite short-term volatility.

Making additional contributions and harnessing the power of compounding can make an enormous difference over time – and it’s never too late to start even if your intended working life is coming to an end.

This underscores why developing and implementing a well-defined strategy and maintaining discipline are crucial to your investment success and how it can significantly change your future financial outcomes.

Next steps

To find out more about how any of these measures may be of assistance in your individual circumstances, please contact Gordon Thoms or David Conte at Calibre Private Wealth Advisers on ph. (03) 9824 2777 or email us here.

This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax/or legal advice prior to acting on this information. Before acquiring a financial product a person should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product. The material contained in this document is based on information received in good faith from sources within the market, and on our understanding of legislation and Government press releases at the date of publication, which are believed to be reliable and accurate. Opinions constitute our judgment at the time of issue and are subject to change. Neither, the Licensee or any of the Oreana Group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Gordon Thoms and David Conte of Calibre Private Wealth Advisers are Authorised Representatives of Oreana Financial Services Limited ABN 91 607 515 122, an Australian Financial Services Licensee, Registered office at Level 7, 484 St Kilda Road, Melbourne, VIC 3004. This site is designed for Australian residents only. Nothing on this website is an offer or a solicitation of an offer to acquire any products or services, by any person or entity outside of Australia.

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