Blogalogue of Random Writings

Shares at record high

Back in 2001, when I was doing a money program on a local community radio station, I started to record some of the financial data on a weekly basis to chart performance over time.

Although, I am no longer involved with the radio station or the finance industry, I continue to keep these weekly records. The reason I keep the record going is because I see it as a waste of the effort that has been put in over the last 3 1/2 years to let it go.

To avoid the data from the Australian sharemarket disappearing off the top of the graph, I had to extend the scale. This prompted me to look at graph and note some of the features. From the peak in March 2002, Australian have passed through a bear market and regained their losses in 119 weeks. It took 52 weeks to fall and 67 weeks to stabilise and come back.

In the 12 weeks since setting a new market high, Australian shares have continued to add value. Looking at the graph, it shows what I have always said to people. "Shares may fall, but they always come back to be stronger than before." While some individual companies may have fallen, the index, which covers the majority of the market has risen.

Another factor that people forget is that the index does not include the value of the dividends paid. Australian companies pay out about 3% in dividends each year. So when you add the dividends, the time to break even after the fall started was actually 85 weeks, not 109.
For long-term growth and ability to increase wealth, a good diversified share portfolio is a low risk, proven performer.

posted by Kevin Paine @ 3:44 pm