It's the Australia Day weekend this weekend. Monday is the day we celebrate our nation and — if the clichés are to be believed — overindulge in both beer and barbecues. I'll be doing a little of each, but not too much.
Patriotism — being proud of your country — is a worthy thing. It's a banner under which we can celebrate and promote community, our common interests and those values and ideals we aspire to as a nation. Of course, like anything, it can be taken too far sometimes, but that doesn't undermine its positives.
Patriotism was behind one of the better known marketing campaigns in recent decades — to buy Australian Made products. One organisation even went a step further, to encourage us to buy Australian made products and from Australian owned companies.
It's fair to say there's a good element of self-interest behind those campaigns, of course — the jobs and profits they create are, on the surface at least, good for the country. Unfortunately, as most economists would tell you, we benefit far more by international trade — buying some of theirs and getting them to buy some of ours — than it we only ever bought Australian.
But there's another element to Buying Australian. And it's less to do with patriotism than with pure self-interest.
What would Warren (Buffett) do?
You see, back in the shadows of the GFC, Warren Buffett penned an op-ed piece for the New York Times, titled 'Buy American. I am. It was his clarion call to investors that although the GFC was tough, it was by no means the end of the US economy or its stock market.
It was a compelling case, and shamelessly taking his lead — with attribution, of course, I wrote Buy Australian. I am. That was in April 2011. Anyone taking that advice — and just buying an index-tracking ETF — would have earned a 38% return since then, including dividends. That's a pretty handy annualised return that comes in pretty close to 10% — and almost smack bang in line with the long-term average for shares.
Just under four years on, it's easy to forget the feelings of worry that surrounded both the physical economy and the sharemarket. Would we plunge into recession? Would there be a 'double dip' recession in the US. Would the PIIGS economies of Portugal, Italy, Ireland, Greece and Spain cause a global meltdown that we wouldn't recover from?
Now, the US is still in recovery mode, Europe is still muddling its way through, and Greece still pops into the headlines every few months. So it wasn't like the last four years have been smooth sailing — and I'm not suggesting that the waters will be calm from here on, either.
Ignore the doomsayers
But that's exactly the point. Despite all of those things, Buying Australian was a very good move. Those who reacted in fear to the geopolitical goings on ended up missing out on a near-40% gain… and likely settled for 3% interest rate in a term deposit for a gain of around 12%. And don't forget, if those shares paid dividends, you had a much reduced tax bill, compared to the person who paid tax at their full marginal rate on that 12%.
The spoils of investing have gone not to the high-flyer, the risk-taker or the market-timer, but to the person who steadfastly — doggedly — invested, year-in and year-out in quality businesses when they were available for good prices.Who ignored the naysayers and the doom-and-gloomers. Not because bad times didn't arrive, but because the share market's long-term wealth creation has been achieved across decades of both booms and busts.
