ASX Education: 11.7%pa for 33 years
From 1941 to the low in 1974, the average annual compound return on the All Ordinaries Index for 33 years was 2.9 per cent per annum. Take off inflation of 4 per cent and you were going backwards. And that doesn't include 1929 to 1941, which would have pulled it even lower. In the next 33 years from the 1974 low (yes I've picked my dates) to the 2007 high, the All Ordinaries Index delivered an average annual compound return of 11.7 per cent. Add in 4.3 per cent of dividends and you come up to 16 per cent, per annum, for 33 years.![All Ordinaries Index Annual Compound Returns](https://marcustoday.com.au/wp-content/uploads/2012/02/All-Ordinaries-Index-Annual-Compound-Returns-300x217.jpg)
- Risk aversion rises and with it volatility. The risk-reward ratio shifts and you have to ask whether your risk-tolerance quotient, and we are all different, has been violated. If so step out. Not losing money is good now. Priority one, survival. Priority 100, stock market glory.
- Making money is going to take more effort. When it's more risky it requires more discipline and skill. Trading skills and in particular risk management (what's that?!) are an available commodity. You will have to learn some of them or you'll be wandering around on the battlefield wearing orange, and we'll get you.
- There is more focus on stocks than ''the market''. It becomes a "traders' market". Stocks become "good" or "bad" and sentiment more polarised on a stock-by-stock basis. There is less tolerance of disappointment and more focus on stocks that do well. News that defines a stock as good or bad starts a trend that will last longer. Perfect for traders. Terrible for those who still think that investment is about having ''faith'' in anything other than today's price.
- There is no long-term investment for the moment. You have to be more flexible. Having strong convictions about stocks or the market beyond tomorrow is misplaced arrogance. This is a time of flux. When the market is priced on risk and risk can change exponentially in a moment, Greece going bankrupt for instance, you can't realistically set investment horizons in advance. Without a reliable long-term ''uptrend'' you have to make money out of any opportunity over any time frame.
- Change your expectations. If the root of all happiness is expectations met, then set realistic ones.
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