From January 1996 to October 16, 2013, the most profitable stock market investment is related to mid cap, whose overall return (including dividends) was equal to an average annual 8,4%. Mid-caps have taken the lead from savings shares – which achieved 8,2% –, once again beating even the blue chip, whose quotations grew by an annual average of 5,6%. The performance of small caps has not gone beyond 5%.
As for the sectors, the investment in bank stocks is less profitable than the one in industrial titles for all the years up to 2011. Since 1996, for example, this is an annual average of +3,3% compared to +8,2% of the industrial portfolio (which in cumulative terms over approximately 18 years translates into +77% against +307%). The performance of insurance stocks was even worse: only +70% in 18 years, ie +3% on average per year. Overall, the Stock Exchange returned about 6,2% on average per year.
Since its establishment, the star segment has always guaranteed better returns than the market, but above all the average of the Mid and SmallCap segments from which they come – the only exceptions being the 2012 and 2013 returns, lower than the 70 averages.
Investment in the Stock Exchange closed in positive terms in 12 out of 18 years. However, also for this figure the sectors make the difference: just four positive years for banking investment and eight for insurance compared with no less than 16 for the employment in industrial securities. After having invariably lost from 2000 to 2008, the shares of the former Nuovo Mercato have shown some increasingly evident signs of recovery.
Compared to a investment in bots, the Stock Exchange would have guaranteed an average annual return higher than the risk-free investment in eight cases out of 18: in addition to the three initial periods (beginning of 1996 and the end of 1996 and 1997), in an intermediate one (December 2002) and in the final three ( December 2010, 2011 and 2012), those who had invested in the Stock Exchange in the midst of the financial crisis (end of 4,5) achieved higher returns than the Bots (2,4% against 2008%).
It remains to be assessed whether the higher yield offered by the Stock Exchange was sufficient to compensate the investor for the higher risk assumed, taking into account a premium which can be estimated at between 3,5% and 5%: this does not seem to have happened, not even for the investment made at a very exceptional time (end of 2008) due to the financial crisis.
FOCUS DIVIDENDS
In 2008 the fall in share prices in the presence of balance sheet results (those of 2007) not yet eroded by the crisis brought the dividend yield of the Italian Stock Exchange to its highest level since 1996 (6,1%); banks in particular were able to consistently reward their shareholders (6,8%), but the palm of the best return goes to savings shares (7,5%), also at an all-time high since 1996.
In 2009, the fall in the dividend payout due to the meager balance sheet results in 2008 of insurance companies and banks instead depressed the overall dividend yield, bringing it to 4,3% (but in line with the levels of 2006 and 2007), thanks to the of industrial stocks (6,4%) which achieved the second best result since 1996, partially offsetting the fall in insurance (1,7%) and banking (at an all-time low of 0,8%).
Il 2010 marks a further fall in dividends (from 4,3% to 4,1%, a level not seen since 2003), but it is now the industries that have closed their 2009 balance sheets lean, consequently reducing shareholder remuneration (to 4,8 .6,4% from 1,7%) while insurance companies (from 2,8% to 0,8%) and banks (from 2,6% to 6,5%) are slightly recovering; the remuneration of savings shares was always strong (2009%), in line with XNUMX.
In 2011 The dividend yield returns to the levels of 2009 – particularly due to the recovery of the values of the banks from 2,6% to 2,9% -, which are confirmed in 2012: the contraction of insurance companies and banks – from 2,9% to 2,3% and 2,2% respectively - was reabsorbed by the increase in industry (to 5% from 4,8%).
Il 2013 sees a return to the levels of a decade earlier (3,4%): since 2004 it had never fallen below 4%. This was mainly due to the decline in industrial companies (from 5% to 4%); the decline involved companies in all size brackets (Top 30 and Small Cap -0,7%, Mid 70 -0,9%). The slowdown in the dy of savings securities was particularly sharp (from 7,3% to 1,6%), to an all-time low since 1996.
Mid-cap companies, with the exception of the two-year period 1996/1997, recorded dividend yields regularly lower than the major companies (a tendency which has accentuated in recent years), so that their better overall returns are entirely attributable to price dynamics. The consideration is even more true for companies in the Star segment which have a particularly cautious dividend policy – the historical average since 2001 of their dividend-to-price ratio, 2,3%, is slightly more than half that of the Top 30, 4,2, XNUMX% -.
LONG TERM… LONG FASTING?
The index of the Italian Stock Exchange from 2 January 1928 to the end of September 2012 expresses, in the straight price version, ie without the reinvestment of dividends, a nominal yield equal to 6,4% per annum. In real terms it becomes negative by 2,4% per annum (average inflation was 8,8%).
This means that a hypothetical investor who had decided to consume the dividends would have found himself after 85 years and 9 months with a capital with a purchasing power reduced by 88%. Calculating the index assuming total reinvestment of the dividends, the real average annual yield is 1%, due to an average dividend yield in the period of 3,4%.
Il reinvestment of the dividend it is therefore necessary to maintain the initial purchasing power of the capital which, given 100 in January 1928, is equal to 229,4 at the end of September 2013. In evaluating the investment in shares, it is fundamental to consider the horizon in which it takes place : assuming an investment period of only one year, the investor would have “risk” in the period in question of earning a maximum of 116% (in 1946) or losing 72% (1945) in the worst case scenario. As the investment period lengthens, the dispersion in average yearly results narrows.
Surprisingly, even if you hold the shares for 30 or 40 years, there is still the risk of suffering an average annual loss of between 3% and 4% (which means, in 40 years, impoverishing your capital despite having reinvested all dividends, as happened between 80 and 1944).
On the other hand, it is crucial the moment of investment. If one decides, unfortunately, to invest in a market peak, set equal to 100 the year in which it occurs, on average after 10 years there is immediately a halving of the capital, then recovering up to more than three quarters after twenty , while at the end of the thirtieth year there is still a loss, albeit slightly.
If, on the other hand, one had invested in one of the years in which the stock market index was at its lowest (in our survey: 1933, 1938, 1945, 1964, 1977 and 1992), on average after 10 years a value of the investment more than doubled and nearly quadrupled after 30 years.
