The CAC 40 index is a diverse weighted stock-price average of France's forty largest public companies including such internationally famous names as Airbus, L'Oreal and Michelin. As a result the CAC 40 should serve as an ideal index for the risk-averse private investor in France with a buy-and-hold strategy over the long-run. But what is the peformance of the CAC 40 over the last two decades? Well consider the following graph, which shows the performance of the CAC 40 between 1988 and early 2016.
Now consider the hard numbers shown in the chart below. Between 1990 and 2015 the average annual return for the CAC 40 is 3.3% without dividends and 6.5% with dividends. And between 2000 and 2015? The average annual return is -1.6% without dividends and 1.7% with dividends. Moreover both of these returns came with rather high volatility. For example as a conservative estimate of volatility between 1990 and 2015 the standard-devations of annual returns without and with dividends are 22% and 26%, respectively.
So the fundamental question remains: how can the risk-averse private investor earn decent returns – say in the range of 6-9% including all fees – with low volatility over shorter time periods than decades? Glad you asked because this is the basis of our business, which we introduce in more detail in the next post of this two-part series.
In the meantime if you have any questions about this topic, please do not hesitate to contact us via email. As always we look forward to hearing from you.