- Australian home prices have risen quite a bit over the past few decades, but Australian stocks have also had a good run.
- According to new research, Australian stocks have delivered the strongest returns to investors of 29 nations since the 1900.
- In real terms, Australian stocks have delivered an average return of 6.5% in US dollar terms, ahead of the global average of just over 5%.
- The top-performing stock markets for real returns since 1900 have been the highest dividend payers.
It’s not only Australia’s home prices that have been record-beaters over the past few decades — its share market returns have been pretty good too.
According to new research from the Credit Suisse Research Institute, in collaboration with the London Business School, out of 23 countries analysed, Australian stocks have delivered the greatest returns for investors since 1900.
With a few caveats, that is.
That’s in real, inflation-adjusted, US dollar terms.
“Since 1900, the Australian stock market has been the best performing market in USD terms, with an annualised 6.5% return,” Credit Suisse says.
“Australia also had the fifth-highest annualised real dividend growth among the 23 countries covered.”
Credit Suisse says the impact of franking credits on dividends weren’t included in the calculations, meaning real returns to investors were likely to have been even higher.
For local investors in Australia, the returns over that period have been even larger, returning, on average, 6.7% per annum in real terms, second only to South Africa in terms of real local-currency returns.
“The Australian equity market has shown itself to be one of the world’s most attractive investment destinations since Federation,” says Andrew McAuley, Chief Investment Officer at Credit Suisse Australia Private Bank.
“The Australian market has achieved this return with relatively low volatility, second only to Canada.”
From a global perspective, McAuley says stocks have outperformed bonds and bills since 1900, returning an inflation adjusted rate of return of just over 5%.
Of note, he also says the top six-ranked national stock markets for real returns have also been hefty dividend payers.
“Interestingly, the top six countries in terms of real dividend growth are also the six best performing markets, although with a different ranking,” he says.
While there are a few subtle messages in the research report, including that investors may want to consider Australia’s stock market as an investment destination along with some political pointers ahead of the federal election, it provides a reminder that stocks have delivered consistent returns for those willing to invest over the longer-term.
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