Thursday, 21 July 2011

Diversified Global Stock Investment Returns In Aussie Dollars

For arguments sake, if ten years ago, in July 2001, you had exchanged one Aussie dollar for local currency in each of Canada, China, Germany, Hong Kong, India, Japan, South Korea, UK, and USA, and invested that money in each country's major stock index, how many Aussie dollars would you receive from each investment if you cashed in today? In addition, you invested one Aussie dollar in the Australian All Ordinaries index.



The bottom line is, you invested $10 ten years ago, and cashing in today you would bank a total of $12.28. That's a return of 2.1% per annum. A sobering thought, I'd say. Though yes, you would have received some dividends along the way. In practice, even assuming you invested a much larger sum, you'd be lucky if those dividends covered your brokerage or fees.

Let's repeat the exercise with a different start date. This time, you were lucky enough to make your investment in early 2009, just before most stock indexes bottomed following the bear market of 2008. You invested one Aussie dollar in each of those same indexes in January 2009. How many Aussie dollars would you receive from each investment if you cashed in today?



If you cashed in all those 2009 investments today, you would bank a total of $11.38. That's a return of 5.2% per annum. Despite your extraordinarily good/lucky timing, that's less than you would currently earn from a cash term deposit .

Plenty of food for thought in those charts. Lots of questions spring to mind. Seeing as I'd rather let the charts speak for themselves, I'll keep the words to a minimum, but here are the first three questions that popped in to my head.

Is diversification a worthwhile investment strategy?

Is investment in stock indexes or funds that track stock indexes a worthwhile investment strategy?

Is it worth looking at investing in the Indian and South Korean markets, given their strength in both the above examples?

GBP/USD Bounces Down From Hourly Chart Trend Channel Line

GBP/USD Daily Chart Nearing Down Trend Line

Also still testing that Head and Shoulders top neckline.

ASX SPI 200 Encounters Hourly Chart Trend Line Resistance

Trend line drawn from June lows.