With media revenue driven by the number of clicks, headlines are becoming increasingly outlandish to lure in readers. As a media consumer of financial news, it’s vital to read media content through a critical lense to separate facts from fiction.
A recent AFR headline grabbed our attention claiming:
It can be easy to take these headlines at face value and not give this any further thought, however such articles ignore critical information. In the case of the returns for ASX 200 (largest 200 Australian companies) for the last 16 years, there was NO reference to Dividends which often represents 50-70% of the return in Australia. Once included in the equation, the return on the ASX since the pre-GFC peak is starkly different.
We can take this analysis one step further by considering the returns on Australian equities versus international equities. While Australian equities have performed strongly over the last 16 years, the returns pale in comparison to the returns on S&P 500 (top 500 US companies), which have returned +456% over the same time period. This highlights the importance of diversifying investments in Australia and internationally to take advantage of opportunities globally and avoid being trapped by ‘domestic bias’.