The ASX 200 Accumulation index – measuring total returns on shares – has lifted by almost 20 per cent over the past year.
The index is 12.2 per cent from record highs. Consumer Staples, Utilities and HealthCare indexes hit record highs yesterday.
What does it all mean?
- Traditionally, when investors have wanted to know how the sharemarket was travelling they would turn their attention to two key gauges: the S&P/ASX 200 index or the All Ordinaries index. But these indexes are just measures of share prices – they don’t take into account the dividends that investors have earned over time. And clearly dividends are a significant component of the returns achieved on shares or equities.
- In fact figures compiled by Mercer show that fund managers that invested in companies paying high dividends produced an average return of 23.6 per cent in 2012, ahead of the 20.3 per cent median return by fund managers.
- The S&P/ASX 200 index is currently 44.1 per cent below the record highs set in November 2007. But the S&P/ASX 200 accumulation index reveals a far different picture, a mere 12.2 per cent away from record highs. If the Australian sharemarket produces similar gains in 2013 to last year then record levels will be quickly in sight.
- In fact three of the key sector accumulation indexes are at record highs. Yesterday the ASX 200 accumulation indexes for Consumer Staples, Utilities and HeathCare hit record highs. The Telecom sector hit record highs on Monday and is just 0.3 per cent away from record levels. And the Financials (excluding REITs) and Information Technology sectors are just 3 per cent off record levels.
- Certainly total returns on shares have posted solid gains of around 20 per cent over the past year with HealthCare (up 55.1 per cent) and Telecoms (up 47.5 per cent) outperforming.
What are the implications for interest rates and investors?
- The key message for investors is to never lose sight of the total returns achieved on your investments. Clearly that advice doesn’t just apply to stocks. An investor buying an apartment certainly doesn’t just look at the potential capital appreciation on the property but also the likely rental returns over time. Of course when assessing total returns, it is also a case of keeping costs in mind. There are costs associated with buying, selling and maintaining investments as well as taxation implications. And those costs need to be totted up at the same time that prices and rental or dividend returns are being assessed.
- The sharp lift in sharemarket returns over the past year would no doubt come as a surprise for many Australians, particularly those with little interest in shares. But clearly the superannuation returns for Australian workers have posted solid gains over the past year, boosting wealth and income levels.
