Rates of return: what history shows
At the end of June 2003, many superannuation and managed funds and shares reported negative returns for the second year in a row. World share markets generally lost value, and even the Australian market lost ground between June 2001 and June 2003.
History shows we cannot expect smooth growth year after year. History also gives us a realistic and useful starting point for what you might expect in future, especially if you consider a wide range of markets over a long period of time.
It can also help you resist the danger of losing all your money from chasing unrealistic returns. When returns from well regulated investment markets go down, disappointed people sometimes get drawn into extremely risky products or even outright frauds.
101 years of history
Here's what a survey of 101 years of investment returns from 16 financial markets around the world shows.
See Triumph of the optimists, by Elroy Dimson, Paul Marsh and Mike Staunton (3 academics from the London Business School), published by Princeton University Press, 2002. Reproduced with permission.
Compound real rate of return after inflation 1900-2000
| Financial asset | Australia | World* |
| Shares | 7.5% per year | 5.8% per year |
| Bonds | 1.1% per year | 1.2% per year |
| Bills | 0.4% per year | 0.9% per year** |
