Aussie equities outperform over 20 years

Australian shares have outperformed residential investment property to provide the best net returns over 20 years, a new report released by Russell Investments and the Australian Securities Exchange (ASX) has found.

This year’s Long-Term Investing Report found that growth assets continue to deliver superior returns to more conservative asset classes, such as cash and fixed income, over the 10, 20, and 25-year periods to December 2010.

The report considered the real-life impact of tax, costs and borrowing on ultimate investment returns. Over the last 20 years, Australian shares returned on an after-tax basis at the lowest and highest marginal tax rates, 11.2 per cent and 9 per cent respectively. Over the same period, residential investment property generated returns of 9.2 per cent and 7.7 per cent at both marginal tax rates.

Residential investment property, however, outperformed all asset classes over the 10-year period, but was surpassed on an after-tax basis by Australian shares at the 25-year mark.

ASX general manager of sales and marketing Will Wilson said market volatility continued to test the resolve of investors. “This report offers investors some practical guidance on the benefits of ASX-listed investments compared to other categories of investments, and, in particular, underlines the importance of investing for the long-term,” Wilson said.

The report further emphasised the need to be mindful of the impact of tax on investor returns.

“Pre-tax returns only tell half the story,” said Russell Investments director of consulting and advisory Greg Liddell. Retirement incomes were funded by post-tax, post-fee returns, he said.

“On a sizeable balance and over many years the variance in tax efficiency of different investment strategies is significant,” Liddell said.