Aussie equities, for example, returned 9.1 per cent on an annual compound basis, before transaction costs, fees and taxes. But their annual volatility ran to 13.1 per cent, on Vanguard numbers. In five of the past 30 years, you lost money on the Australian sharemarket.

Difference in returns

Safer, more reliable Aussie bonds offered a pretty decent 8 per cent annual return, with only 4 per cent volatility. And in only one year did they lose you money: last year. (One can't help but think that performance figure has been flattered by the extraordinary and steady drop in global rates since the early 1980s.)

But even that small difference in returns, when compounded over 30 years, translated to a big difference in how much money you had made in the end: $136,000 for shares versus $99,000 for bonds. That's another insight: even small differences in rates of return can make a big difference over a long time.

For Vanguard's local head of market strategy, Robin Bowerman, the historical study is an opportunity to appreciate the potential wealth accumulation from patient capital invested in financial assets. It is, Bowerman says, a chance to step back from the daily noise.

"With all due respect to the daily financial media, they have to file stuff every day," Bowerman says. "Markets go up and down, companies have issues and successes. There's a lot of short-term noise investors get bombarded with, and it's great to step back and look over the long term.

"Time is very much one of the best weapons investors have."


Of course some of us have more time than others. Your average 30 or 40 year-old probably has the three decades, Bowerman notes.

But those nearer to or in retirement may well focus on different aspects of the chart. And rightly so, says Schroders head of multi-asset Simon Doyle.

For Vanguard's local head of market strategy, Robin Bowerman, the historical study is an opportunity to appreciate the potential wealth accumulation from patient capital invested in financial assets. Tamara Voninski

No sitting back

Doyle is less convinced that the 30-year view represents hard evidence investors should sit back and let compound interest take their capital from the bottom left to the top right, graphically speaking. He points out that there have been periods where your money can essentially go nowhere for longer than a decade.

For US stocks, the 12 years after the dot-com bust of 2000 are a case in point. American investors had a similar experience running from the mid-1960s to the early 1980s, Doyle says. Australian assets were less affected by the dotcom bust – back to black after only a couple of years – but it still took more than five years for Aussie share investors to recoup the capital they lost after the GFC. Listed property was caught in the eye of the storm in 2008, and spent the best part of a decade in the red.

Such an experience can be devastating for those close to retirement, or actually living on their savings.

The old adage is "it's time in the market, not timing the market" that pays off over the long term. But Doyle, whose job is shepherding multi-asset portfolios through market cycles, does believe that you can identify the longer-term trends and position accordingly.


"Time is very much one of the best weapons investors have." Karl Hilzinger

As he says, "you don't keep speeding up as you are racing down the highway – if you think there is a turn coming, you start to slow down and start looking for the exit".

Speeding up is essentially what investors did heading into the tech wreck around the turn of the millennium – it's not like there weren't warning signs, Doyle says.

"I'd draw some parallels to where we are today," he says. "If you blocked out that bit in the middle [in 2011 and 2012 – the time of the euro sovereign debt crisis], we've had 10 years of rising markets and accommodative monetary policy. We've got low bond yields, tight credit spreads and, particularly in the US, reasonably extended [sharemarket] valuations."

Welcome to sideways

He believes that for investors buying into the market today, the experience they'll have over the next five to 10 years will look a bit more like the "sideways" patch in the middle, "where the market just grinds around".

Doyle is less convinced that the 30-year view represents hard evidence investors should sit back and let compound interest take their capital from the bottom left to the top right, graphically speaking. supplied

"We're entering a phase we haven't had for the past decade," Doyle continues. "Monetary policymakers are managing potentially overheating economies and rising inflation, specifically in the US. What does that mean for markets when all the good news of that previous policy experience is already in prices? Those things are starting to line up with a more difficult period ahead."

Moving away slightly from the raw performance figures, it's also worth noting the year-to-year performance of investable assets is out of your hands. Aside from blending a diverse group of investments together in a portfolio that matches your risk profile, there's no controlling whether prices move north or south over any given period.

But, says Vanguard's Bowerman, "there are two things you can control: the cost and how much you save". In the current environment with low return expectations, he says it's more important than ever to question whether you're saving enough.