Have I Missed the Boat for US Shares?

A huge welcome back to the Financial Autonomy podcast, our first episode in about 5 months.

The briefest glance at the market section in the GainingChoice e-mail will make it clear that investing in U.S. stocks has been by far the best strategy of the past several years.

The five and 10 year average returns on Australian shares, inclusive of dividends, has been about 8%. In comparison The US S&P 500 index has delivered a 10 year average return of about 13% including dividends. The return is even higher when measured over five years. Emerging markets, the other market sector that we follow in GainingChoice, has generated an average return of about 5% per year over both measurement periods.

So 13% versus either 8% or 5%. It's not hard to choose which one you’d prefer, if only we had the benefit of hindsight. But what do these percentage return differences mean in dollar terms?

$100,000 invested in the U.S. S&P500 index 10 years ago would be worth about $340,000 today, assuming all dividends were reinvested.

The same $100,000 invested in the Australian ASX 200 index would be worth about $216,000, again with all dividends reinvested. So whereas investing on the Australian Stock Exchange you did a little better than doubling your money, in comparison investing in U.S. stocks you more than tripled your money over the same time period.

Emerging markets fared even worse, with your $100,000 having grown to approximately $163,000.

The point here is that the differential is not small. It is meaningful, and it is impactful.

But that's backward looking. We can't jump in a DeLorean and travel back in time unfortunately.

The question then for us investors is how should we play things from here?

Disclaimer

Brought to you by Guidance Financial Services

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