International Equity Markets Capstone Project

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International Equity Markets

Residential investment property performed better than all investments in the last decade. Australian bonds were the second best performing asset class returning 6.4% p.a. Australian shares were the third highest with 6.1% p.a (Australian Securities Exchange, 2012). Within the same period, the Global Real Estate Investment Trust (REITS) outperformed the Australian REITs. Unhedged oversea shares achieved the lowest return of any asset class over the 10-year period. Had any investor hedged his overseas shares investment he would have received 3.7% p.a. And 6.7% p.a. over the past 10 and 20 years (Australian Securities Exchange, 2012). These were the results before tax but after costs. The results after tax and after costs for the past decade indicated that the residential property outperformed all other asset classes at the lowest and highest marginal tax rates with returns of 7.2% and 5.8% p.a. respectively (Australian Securities Exchange, 2012). Within that same period, the Australian shares achieved the second highest return of 6.5% p.a.

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And 4.6% p.a. At the lowest and highest marginal tax rates respectively (Australian Securities Exchange, 2012). For the past two decades, Australian shares performed superiorly over other asset classes at both the lowest and highest marginal tax rates returning 9.0% p.a. And 7.0% p.a respectively (Australian Securities Exchange, 2012). Residential investment registered the second highest return of 8.1% p.a. And 6.6% p.a. At the lowest and highest marginal tax rates respectively. It is projected that the incorporation of borrowing money to invest, residential investment property will continue to outperform Australian shares at both the lowest and highest marginal tax rates (Australian Securities Exchange, 2012). However, extension of data period will make the Australian shares to outperform residential investment property in the coming 20 years. Borrowing money to invest is at times called gearing.

Australian stock market is relatively risky. The risks originate from continued volatility in equity markets driven mainly by international factors like the European sovereign debt issues,.....

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