With nothing else to do during lockdown, I thought I would have a little fun with excel and look at two closely related indices and see if analysing their returns told me any substantive. Spoiler alert it didn’t other than there were times when the All Ords TR did better and times when the ASX/S&P/200 did better. The reason behind these variances is not something I have investigated yet. The table below looks at the performance since 2002 of the following –
- All Ordinaries Total Return Index
- All Ordinaries Price Only Return
- ASX/S&P200 Total Return Index
- ASX/S&P200 Price Index
On the table, I have marked in blue the best performing index for the year and in red have marked the worst-performing. As you would expect the TR indices outperform the price only – the impact of dividends over the life of an investment can be substantial as can be seen below –
However, the impact of dividends is well known or at least it should be. Therefore it should be well known that TR indices outperform price only indices – their gains are greater and their drawdowns are to a degree insulated by the dividend stream. However, the central question is does this tell us anything interesting and my immediate answer is no. It is like a lot of research into financial markets – it is of academic interest but of no real bearing on your decision making. So other than passing a morning for me I don’t think it tells us anything earth shattering or anything that would alter the course of anyone’s investment philosophy.