What's going on with interest rates? At the beginning of the year there was near unanimous agreement that interest rates would fall at some point in 2024, probably in the back half of the year. Yet here in Australia at least, talk is of the potential need to lift interest rates. As it stands, interest rates are already at their highest level in over a decade, and we need to go back to 2008 to see a time where they were at these levels for a sustained period.

This week I wanted to take a look at the change in thinking that is underway globally with respect to interest rate policy, and what that means for those of us with mortgages, and also those with investments.

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A huge welcome back to the Financial Autonomy podcast, our first episode in about 5 months.

The briefest glance at the market section in the GainingChoice e-mail will make it clear that investing in U.S. stocks has been by far the best strategy of the past several years.

The five and 10 year average returns on Australian shares, inclusive of dividends, has been about 8%. In comparison The US S&P 500 index has delivered a 10 year average return of about 13% including dividends. The return is even higher when measured over five years. Emerging markets, the other market sector that we follow in GainingChoice, has generated an average return of about 5% per year over both measurement periods.

So 13% versus either 8% or 5%. It's not hard to choose which one you’d prefer, if only we had the benefit of hindsight. But what do these percentage return differences mean in dollar terms?

$100,000 invested in the U.S. S&P500 index 10 years ago would be worth about $340,000 today, assuming all dividends were reinvested.

The same $100,000 invested in the Australian ASX 200 index would be worth about $216,000, again with all dividends reinvested. So whereas investing on the Australian Stock Exchange you did a little better than doubling your money, in comparison investing in U.S. stocks you more than tripled your money over the same time period.

Emerging markets fared even worse, with your $100,000 having grown to approximately $163,000.

The point here is that the differential is not small. It is meaningful, and it is impactful.

But that's backward looking. We can't jump in a DeLorean and travel back in time unfortunately.

The question then for us investors is how should we play things from here?

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GainingChoice

Welcome to the What's Possible podcast our dive into the people who inspire us, how they achieved what they did, and what lessons we can all draw so that we can live the most interesting and full lives possible.

Let us know what you think by hitting "reply" to a GainingCHOICE email.

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I started this podcast in 2017 with the desire to put myself out there on what I felt was important in money management and wealth creation, gaining choice. My hope was that in putting that message out into the world, in time I'd attract people to our Financial Planning practice who shared this worldview. It took a while but I'm very pleased that this did indeed work.

Why am I taking a break now? There's a few factors.

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It's not uncommon I find, for people to arrive at the desire to achieve Financial Autonomy in their 40s or 50s. Particularly for those with kids, until this point in life it's largely just been survival mode. Money in equals money out. First it's saving a deposit for a home, then it's getting the mortgage under control. Usually either the first home isn't the forever home, or else renovations and improvements are required. Then you've got the costs of raising children.

Layer on top this is the potential for divorce, and it's not uncommon for me to have people reach out wanting to achieve financial security but worried that it's too late for them.

If you’re worried that it might be too late for you build wealth and achieve financial security, this episode is for you.

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In this episode, we talk with David Tuckwell of Global X about a few interesting potential satellite ETFs.

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I received a question recently for my Ask an Expert column where the reader was comparing the annual income they received from their investment property, against the growth in the value of this superannuation fund. Their conclusion, looking at the numbers, was that they should sell the investment property and shift all the money to super.

But their comparison was flawed on multiple levels. So in this week's podcast I thought I'd talk you through the differences across the main investment options to help you consider what the best path might be in your particular situation.

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