Unpredictable returns

A risky investment is one that delivers unpredictable returns from year to year. So even though a risky investment can potentially deliver high long-term returns, it’s generally subject to relatively higher volatility.

The following interactive tool demonstrates the relationship between volatility of returns and the length of investment. 


This chart shows the minimum and maximum returns for a notional investment in Australian shares over the past 122.58 years (as at 01-Jan-2022), for 10 different holding periods - from 1 year to 10 years.

For each holding period, we have calculated the average annual return achieved for each possible investment (using monthly returns).

An example for the five year holding period: Between Jan-1900 and Aug-2022, there were 1 413 possible 5-year investments (the first one from Jan-1900 to Jan-1905, and the last one from Aug-2017 to Aug-2022). Of those 1 413 periods, the highest average annual return was 40.39%pa, achieved over the period Aug 1982 - Aug 1987. The lowest average annual return was -9.15%pa, over the period Dec 1969 - Dec 1974.

We use monthly returns of the ASX/S&P 200 Accumulation index (Source: Datastream) for the calculations, from Jan-1900 to Aug-2022. Remember, indexes are not a representation of a financial product - they do not take account of costs or tax and do not reflect the performance of any individual portfolio of stocks.

Past performance is not a reliable indicator of future performance.  Investing in shares is subject to risk, and there is no guarantee that an individual investor will make a profit by investing in sharemarkets.