It's hard to believe that ten years ago the official cash rate stood at 6.25%.
Today, the cash rate is 1.50%.
Although it's possible that interest rates may have bottomed, you'd want to hope that after such a massive reduction in the price of money over the last decade, there would have been some amazing share market returns.
After-all, with cheaper interest rates comes lower borrowing costs leading to higher business and consumer spending. And then you have the effect of instantly making dividend-paying stocks appear more attractive, at least until the yield differential is arbitraged away through additional buying demand for stocks.
But here's a shocking fact.
The All Ordinaries accumulation index has averaged only 3.8% per annum over the last ten years. Without the inclusion of dividends the All Ordinaries (INDEXASX: XAO) is lower today that it was in 2007.
Of course, these statistics are highly dependent on timing.
2007 marked the beginnings of the GFC with the implosion of subprime mortgages making the news, and infecting the market's bullish animal spirits through 2008 and early 2009.
If you had instead bought into a basket of stocks resembling the All Ordinaries in early 2009 at its low point, you'd be up 76% on your initial investment today.
But what about those stocks that were crunched by the GFC and have remained in the doldrums ever since?
Stocks like Quintis Ltd (ASX: QIN), Santos Ltd (ASX: STO), Reject Shop Ltd (ASX: TRS), Sundance Resources Limited (ASX: SDL) and Billabong International Ltd (ASX: BBG).
All of these have performed disastrously, leaving a trail of per annum average returns in the red and a wake of weeping shareholders.
With respective annual average returns of approximately (3%), (5.5%), (3%), (39%) and (16.5%), I can understand the novice investor being scarred for investing life if this was their first foray into the sharemarket.
Afterall, if any investor had invested $5,000 across each of these stocks 10 years ago, their total investments today would be only $2,233 — a decline of 55% after including dividends in the calculation.
Colossal wealth destruction indeed.
The reasons for this are of course dependent on each individual company.
If it's not fluctuating revenue growth, skinny interest covers on debt or massively increasing share counts, you can bet negative returns on shareholder equity, falling profits and reduced margins will ensure your investment stays in the dog house, as these company stocks have so admirably illustrated.
But it doesn't have to be that way.
Which is why stock selection is absolutely critical.
Even though there were a number of businesses whose stocks were slammed during the GFC, many came well out in front in the ensuing decade.
Just consider InvoCare Limited (ASX: IVC), Commonwealth Bank of Australia (ASX: CBA), Flight Centre Travel Group Ltd (ASX: FLT), Amcor Limited (ASX: AMC), and Transurban Group (ASX: TCL).
Sure, they all had their difficulties with reduced demand brought on by worry and fear in the overall economy back during the dark days of the GFC, but the difference here is in the sustainability of each company's business model with the latter list of businesses showing far more resilience.
Which is why you need to do your research, read up on your companies before buying shares, and even employ the services of The Motley Fool to help you with all of the detail in the hope that you'll separate the good from the bad.
We won't get every selection right of course, but we'll do our absolute best to avoid disastrous stock like the ones referred to above in the first list.
In that vein, if you're a serious investor and you're not already a subscriber to one of our services, then you should click on the link below which will provide you with some simple lessons to help you make your fortune.
