Why Invest in Shares? The Proof is in the Pudding

We’ve been singing the virtues of investing in shares for a while here at the Hip Pocket.

And despite the fact that investors have had a bumpy ride lately and the media is collectively biting its nails and gnashing its teeth about the market’s short-term prospects, we’ll continue to do so.

Here’s why.

This chart from investment management company Fidelity shows the growth of a $10,000 investment made 30 years ago into the S&P/ASX 200 All Ordinaries Index, which basically tracks the performance of the top 200 companies in Australia.

Fidelity Worldwide Investment Growth of $10,000 ASX

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It’s clear from the chart that the world has experienced a lot of uncertainty since June 1984: wars, asset bubbles, recessions, a couple of currency crises and a global financial crisis to boot.

But even so, by June 2014, that initial $10,000 investment would have grown to a hefty $283,830 assuming dividends were reinvested; an average return of 11.8 per cent a year. A similar investment in global shares, on the other hand, would have to grown to $157,127 with an average return of 9.6 per cent, which is still not such a bad result.

And while there’s no guarantee that these gains will be repeated over the next 30 years – past performance is no indicator of future returns and all that – history shows us that over the long-term, investing in shares can be a highly effective strategy for building real wealth.

That’s not to say go ahead and put all your money into shares right now. There probably is some turbulence ahead and we’ve certainly got our seat belts buckled. But we’ll be watching developments with one eye firmly on the horizon, because at the end of the day with shares, the proof is in the pudding.


Want to learn more? How to Make a Million Bucks Investing in Shares.


Image: Jeremy Bronson, via Flickr