Image source: Getty Images
You hear about it all the time. I talk about it all the time.
Sometimes it's referred to as 'The market'. Or 'The stock market'. Or 'The ASX'.
As in, 'the market was up 2%' on Wednesday. Or 'the ASX was down 0.2% yesterday'.
And it's 100% true, accurate and important. These indices tell us about the value increase or decrease, in total, of the companies listed on the ASX.
The S&P/ASX 200 Index (ASX: XJO)? That's the largest ~200 companies listed on the Australian Securities Exchange.
The 'All Ordinaries', otherwise known as the S&P/ASX All Ordinaries Index (ASX: XAO)? The biggest ~500 or so.
You can also find quotes for the S&P/ASX 20 Index (XTL), the S&P/ASX 50 Index (ASX: XFL), the S&P/ASX 300 Index (ASX: XKO), and the 'Small Ordinaries', among many others.
They're really useful, as snapshots of what's going on, in total, and as a pretty good approximation of the increase or decrease in wealth of their owners.
(Each index covers a slightly different group, of course. Here at The Motley Fool, we've long preferred the older, but more comprehensive, All Ords over the newer and more widely used ASX 200, because the former includes more companies and is therefore more representative of the market as a whole.)
But averages and aggregates can hide a lot of detail.
(And a quick note: none of the numbers that follow include dividends, unless stated.)
For example?
Did you know that the difference between the best performing ASX sector and the worst performing one, over the last 12 months, is a whopping 72 percentage points.
No, that's not a typo. Seventy-two percentage points. Over a single year.
Now, for context, the All Ords is up 6.6% over the last twelve months. The ASX 200 has gained 7.0%
The best performing sector has gained 39.1%. The worst performing lost 33.6%
Not only that, but check this out, too: The gap between the second best and the second worst is… 62 percentage points. Again, not a typo: sixty-two!
So, the ASX has 11 sectors, and 4 of them have moved by more than 30% – 2 each in each direction, while the average has gained between 6.5% and 7%.
The sector that's closest to that average? A gain of 7.3%.
Everything else is more than 6 percentage points higher or lower than the market average (13.4% and 0.7% are the next closest).
So, compared to the average, only 1 of the 11 sectors is even remotely close!
At this point, I probably should say that these are observations only. I'm not complaining. Or celebrating. It's not good, bad, right or wrong. No-one is messing with us. It's… just the way things go, sometimes.
And yes, it reminds me of the old joke about the economist with one hand in the oven and the other in the freezer who says that, on average, things feel about right!
Why am I telling you all this?
Two very different reasons.
First, this is the beauty of index-investing, if that's your thing. Two down 30%, two up 30%, but you don't need to care, because you've got your 6.5% or 7%, plus dividends, and haven't even noticed the very different fortunes of different parts of the market.
But second, if you're a stock-picker, it's a reminder not to get carried away with euphoria or despair.
Let's peel back the curtain a bit, too:
The two high-performing sectors? Energy (yep, oil… surprise!), and Resources.
The two worst? IT and Healthcare.
(The average one is consumer staples, if you're wondering!)
If you own resources shares, you've had a very good 12 months. But was it luck or good management? Remember… a rising tide lifts all boats.
If you're a technology investor, you've probably had an absolute shocker. But was it poor stock-picking, or did you just get whacked by a market-wide change in sentiment? Remember, in the short run, the market is a voting machine, not a weighing machine.
Me? I own (a small number of) shares in a single resources company. And no ASX-listed technology companies. So I have a very, very tiny dog in this fight – but that's not really the point here.
And I'm not giving an investment view on either sector. Just making the case that, compared to 'the market', resources investors feel like kings, and tech investors feel like paupers.
But what I am saying is that you shouldn't take either feeling to heart.
Because… sentiment tends to move, and sometimes quickly.
Using year-end data, here's what I can say by year (I'm excluding 2025, because most of that data is already in the 'last 12 months' data I used above):
2024: IT was up 49.5% while Energy lost 18.8%.
2023: IT was up 30.4%, and Energy fell 3.8%.
2022: IT fell 34.2%, but Energy gained 39.7%.
2021: Both had unusually flat years, down 2.8% and 2.0%, respectively.
Now, imagine how you felt, in each of those years.
Joyous sometimes, miserable at others.
Self-congratulatory, and self-flagellating.
Like a genius… and a dunce.
But what was really happening?
Prices were just… moving. Sentiment was shifting. Popularity contests were being won and lost.
Most importantly, comparing those results to any of the stock market indices would have made you feel like a massive winner, or a huge loser.
For a while. A short while.
Now, I'm the last person to say you shouldn't keep score in investing. You absolutely should – if only to work out if all of the time, effort and energy you put into your investing is worth it, or whether you should just buy a low-cost, passive, index-based ETF and go fishing instead!
But the timeframe over which you keep score absolutely matters.
As does allowing for volatility.
And even long periods can be pernicious.
How so? Well, the ASX Energy sector is up 32.0% over the past 5 years.
But all of that gain – and more – has come from just the last three months of that 60 month period.
Between March 2021 and December 2025, the Energy index was actually down 2.8%. It's only the gain of 36% since the middle of December that's allowed the sector to deliver that 5 year gain.
Similarly, Information Technology is down 20% over the past 5 years, but was up 50% between March 2021 and October of last year, before falling.
Am I cherry-picking? Not really.
The point is that if I'd written this article 6 months ago, the numbers and examples would have been incredibly different – even for 5-year periods.
But if you hadn't read that article, and looked only at the numbers, you'd have felt very different about those different sectors.
You might have even formed different conclusions about your investing decisions – and abilities – too.
Conclusions that might be different to the ones that you'd reach today, on the same basis, but with very different data which might lead to very different outcomes.
What's really important is that we don't use only share price outcomes, even over multi-year periods, to assess our investing performance.
Yes, over longer terms, the share price (and any dividends!) are all that matter – you can't buy a loaf of bread with the competitive advantages of your favourite company; only with the proceeds of dividends or the sale of its shares.
But in the meantime? The question for every investor – at the time of purchase and for as long as you own a company's shares – is a simple one: Is today's price attractive, based on the future I see for this business?
And keep two quotes in mind:
"Markets can remain irrational longer than you can remain solvent."
– John Maynard Keynes
and
"If the business does well, the stock eventually follows."
– Warren Buffett
No, it's not always easy. Yes, five years feels like forever, especially when share prices are down.
But that's the best way I know of to put the investing odds in your favour.
Fool on!
