Bill Gates once said, “most people overestimate what they can do in one year, and underestimate what they can do in ten years”. 

He might not have been referring specifically to investing when he said it, but the quote applies all the same. 

The challenge is that your investments might increase by 1-2% in a particular year… or even go backwards.

And that can be really de-motivating. But zooming out and taking a look at how investments play out over the long term can really highlight how important it is to stay in it for the long game.

So to zoom out, we’re going take it back to 2014.

‍Side note: for consistency, this article will look at data for the ten years from 2014-2023 when assessing investments.

In 2014, Taylor Swift released 1989, Guardians of the Galaxy gave us one of the best film soundtracks, and How I Met Your Mother gave us one of the worst possible finales.

If you had invested $10,000 in 2014, and made no additional investments, here’s what that would have looked like across different asset classes.

Cash savings

Let’s start with the safest investment option, holding your money in cash. 

The interest rate offered by bank accounts fluctuates depending on the cash rate set by the reserve bank.

The below table shows how interest rates have changed over the last 10 years, and what an investment of $10,000 would look like if it was compounded annually.

If you held your $10,000 in cash for 10 years, but the end of 2013, that amount would be worth $12,415, which is a 24% increase.  

The Australian stock market:

The ASX200, the index which tracks the top 200 listed companies in Australia, has returned on average 8.0% in the ten years to December 2023.

An investment of $10,000 into the ASX200 for the ten years to December 2023 would therefore be worth (10,000*1.08^10) = $21,589.25 - that’s a 116% increase.

The US stock market:

The S&P500 is the index which tracks the top 500 listed companies in the US. In the ten years to December 2023, the index has returned on average 13.13% per annum.

That means $10,000 invested at the beginning of that ten year period would be worth $34,338.23, which is an increase of 243% over the course of the ten years.

The Australian property market:

The property market is seen as one of the sexier investments in Australia, particularly as home ownership is so important in this country.

According to Corelogic, Australia’s national median dwelling value grew 6.8% per annum over the 30 years to 2022. 

Assuming 6.8% as our yearly growth rate, an investment of $10,000 in January 2014 would be worth ($10,000*1.068^10) = $19,306.90 10 years later.

Gold:

And just to change things up, let’s also look at an old school investment.

While most people don’t hold their wealth in gold coins or gold bars anymore, this precious metal is still seen as a safe investment in the long term.

In December 2013, the price of gold was approximately $44.79 per gram. With $10,000, you would have been able to buy 223.26 grams of gold.

In December 2023, the price of gold was $97.23 per gram. The value of your gold would have gone up to $21,707.97, which is a 117.08% increase.

It’s worth mentioning though, that with global economic uncertainty post-pandemic, gold, as a “safety net asset” has been climbing the charts since 2020.

Making informed investment decisions

Here’s what these investments look like side-by-side.

But as much as the looking at how asseta have performed in the last decades is useful, it's not enough to base an investment decision.

And there are a few reasons as to why.

1. Past performance is not an indication of future performance

This is the famous line that all superannuation funds, managed funds and investment managers use to cover themselves.

But it's also one to keep in mind, as future circumstances can always change how assets will perform.

2. You need to take into account your own personal factors 

That’s things like taxes, your personal finance goals, your access to funds, borrowing power etc.

3. Every investment has risk-reward trade-off

We know that lower risk investments like cash tend to have smaller returns.

On the other hand, higher risk investments like Bitcoin, can offer a much higher return…potentially.

In early 2014, Bitcoin was sitting at a price of around $1,411, and in December 2023, it was priced at $64,305.

That’s a whopping 4,457% increase over 10 years.

While the last 10 years have seen a massive jump in the value of Bitcoin, it’s an asset that has fluctuated a lot in that time, and that can be a tough wave to ride.

That’s why it’s so important to understand your financial goals and risk tolerance when you’re making investment decisions. 

The main idea behind comparing the past performance of these assets is to help visualise how investing can impact your wealth in the long term.

It’s all about actions you take today that reward the future you.