GENERATE INCOME

2.0 PERFORMANCE OVER TIME
It is important that our analysis takes into account the real life impact of tax and costs on ultimate investment returns.
As such, the following two charts look at the performance of various asset classes over the past 20 and 10 years ended
December 2014.
20 Year Investment Returns - after tax and after costs
Over the 20 year period, Australian shares outperformed all other asset
classes at both the lowest and highest marginal tax rates returning 9.7%
p.a. and 7.6% p.a. respectively. Residential investment property achieved the
second highest return of 8.9% p.a. and 7.5% p.a. at the lowest and highest
marginal tax rates respectively.
Australian bonds delivered a return of 6.1% p.a. and 3.9% p.a. respectively
over this period. It is interesting to note that those on higher incomes and
taxes over this period would have been better off investing in Australian
shares, residential investment property, Australian Real Estate Investment
Trusts (A-REITs), and hedged overseas shares.
CHART 1: ASSET CLASS INVESTMENT RETURNS FOR THE 20 YEARS TO 2014
10%
9.5
9.7
9.9 9.8
9%
8.9
9.0
8.6
8%
7%
6%
7.6
0.8
7.5
7.7
6.7
6.9
7.5
6.1
6.4
7.8
6.5
7.9
7.1
6.4
6.5
Gross return
Returns (%p.a)
5%
4%
3%
4.5
3.9
3.7
3.0
3.1
5.3
After tax lowest marginal tax rate
After tax top marginal tax rate
Superannuation
2%
1.9
Source: Russell Investments / ASX Long
Term Investing Report June 2015
1%
0%
Australian
Shares
Residential
Investment
Property
Australian REITs
Australian
Bonds
Cash
Overseas Shares
(hedged)
Overseas shares
(unhedged)
Note: All returns are net of costs. Past
performance is not a reliable indicator of
future performance
ginal tax rate
rginal tax rate
3