Many Australian financial advisers get to have this conversation with their client at lunch as we all head into the last quarter of the financial year:
“Hello Mr and Mrs Client, we believe the last quarter is set up quite nicely but regardless, what a great 12 months we’ve just had in Australian stocks. You’re up 11.8% in value and you made another 4% in dividend yield. Add a bit for the franking credit and you’re close to a 17% total return for the year. That’s amazing!! Now, let’s order another bottle of wine and talk about the Broncos and the Matildas.”
Doesn’t that sound good, a 17% all-in total return? One small problem.....it entirely ignores the readily available options. Let me show them to you:
S&P 500 35.5% total return
Nasdaq 100 46.0% total return
Global Shares 27.0% total return
And there is no great burden to get that return - just as easy, just as liquid, about the same cost, and the volatility (or risk, or standard deviation) is, for the purposes of this exercise, functionally the same. That is:
ASX 200 volatility averages at around 14
S&P 500 volatility averages at around 17
Nasdaq 100 volatility averages at around 18
Global shares volatility averages at around 15
Wealth management is a very personal business so look for a firm you like and trust. However, if that firm isn’t talking to you about different sources of return other than Australian shares, I’d respectfully posit to you that you need to keep looking.
