We don’t have access to CBA’s term deposit rates since 1991 but the best indication we could find were Reserve Bank of Australia’s interest rates which can be found at: http://www.rba.gov.au/statistics/tables/index.html#interest_rates
CBA share price and dividends we sourced from:
http://www.commbank.com.au/about-us/shareholders/shareholder-information/dividend/
You can see by the table below there is an interesting comparison.
Click on the image above to enlarge
- Had you invested $10,000 AUD in a CBA term deposit and rolled up the interest so it was reinvested year after year, from 1991 to end of 2011 you would have a total investment value of $31,259 AUD.
- Had you instead invested $10,000 AUD in CBA listed shares and reinvested the dividend, your total portfolio value over the same time frame would be $235,769 AUD.
- CBA shares paid a higher dividend than term deposits over 68% of the time.
- The total return on investment in term deposits over this 20 year period was a compounding rate of 5.86% per annum (Australian inflation over that time frame was roughly 5%).
- The total return on investment in CBA shares over this 20 year period was a compounding rate of 17.12% per annum.
- These numbers are only upto end of 2011 where CBA shares were trading at $50 per share and as of today it is trading at $72 per share (27th August 2013). See http://asx.com.au/asx/markets/priceLookup.do?by=asxCodes&asxCodes=CBA This means the performance numbers I have given would show an even greater return for CBA shares over term deposits.
Click on the table below to enlarge
As can be seen, equities over this period have been more volatile than fixed interest instruments.
For many retirees seeking income they are statistically more successful sticking with a high paying dividend on a rising share price than simply taking bank guaranteed products that do not keep their purchasing power when inflation is factored in.
Building income or seeking capital growth still requires research and application of Symmetry Groups vetting criteria. However, once these steps are taken it would be possible to build efficient portfolios with a strong value base for future gain.
If you are not a client of Symmetry Group but would like to discuss your portfolio, please contact us.
Best
Todd
