Australian Investing Analysis
Two questions evidence-based Australian investors should know:
how much can you safely withdraw in retirement, and
how concentrated are the market's returns?
The 4% rule came from the 1994 Bengen study on US data.
Australia has a different market history, different inflation, different tax treatment (franking credits),
and different super rules. This tool runs the same historical sequence-of-returns methodology on
124 years of Australian data (1901–2024) across different portfolio mixes.
Your Scenario
Portfolio
Safe withdrawal rate — this portfolio (historical, ABS CPI-adjusted)
—
Safe Withdrawal Rate by Portfolio × Retirement Length
Target: 90% success rate (historical sequences, ABS CPI inflation, franking included where applicable).
Values shown as % of portfolio per year.
Historical Sequences — Portfolio Paths
Every bar below is a different historical 30-year window. Red = portfolio ran out.
The worst sequences are labelled. Drag the slider to see any withdrawal rate.
4.0%
Survived
Ran out
Worst surviving sequence
Why Does Australia Differ From the 4% Rule?
✅ Helps
Franking credits add ~0.3–0.8% per year to AU share returns for domestic investors — invisible in index returns but real in your pocket. For a 100% AU portfolio, this is worth 0.5–0.7% annually. For VDHG-like portfolios (~36% AU shares), closer to 0.2–0.3%.
Long data record: 124 years including two World Wars, the Great Depression (−30% AU 1930), hyperinflation, and GFC. The SWR you see is truly stress-tested.
Long data record: 124 years including two World Wars, the Great Depression (−30% AU 1930), hyperinflation, and GFC. The SWR you see is truly stress-tested.
⚠️ Complicates
Home bias risk: AU is ~2% of world market cap. A 100% AU portfolio has high concentration in banks and miners. A bad decade for iron ore or housing could devastate returns.
Super rules change: Preservation age, contribution caps, tax treatment in accumulation vs pension phase — the rules since 1992 are a short history. Pre-super SWR analysis models private portfolios, not exactly how Australians actually retire.
Sequence risk is real: Retiring in 1929, 1969, or 2000 on AU shares produced dramatically different outcomes than retiring in 1982 or 2009. Timing luck dominates over 10-year horizons.
Super rules change: Preservation age, contribution caps, tax treatment in accumulation vs pension phase — the rules since 1992 are a short history. Pre-super SWR analysis models private portfolios, not exactly how Australians actually retire.
Sequence risk is real: Retiring in 1929, 1969, or 2000 on AU shares produced dramatically different outcomes than retiring in 1982 or 2009. Timing luck dominates over 10-year horizons.
💡 Takeaways
• The AU 4% rule holds reasonably well for balanced portfolios (60%+ growth) at 90% success over 30 years.
• For 40–50 year retirements (FIRE), target 3.0–3.5% for 95% success.
• Franking credits effectively lift the rule by ~0.3% for AU-heavy portfolios.
• A flexible withdrawal strategy (reduce by 10% in down years) dramatically improves outcomes without meaningfully reducing expected lifetime spending.
• The worst retirement cohort in AU history started in 1929–1930 followed by 1969–1970 (stagflation). Both were recoverable with diversification; neither was recoverable with 100% AU shares and 5%+ withdrawal.
• For 40–50 year retirements (FIRE), target 3.0–3.5% for 95% success.
• Franking credits effectively lift the rule by ~0.3% for AU-heavy portfolios.
• A flexible withdrawal strategy (reduce by 10% in down years) dramatically improves outcomes without meaningfully reducing expected lifetime spending.
• The worst retirement cohort in AU history started in 1929–1930 followed by 1969–1970 (stagflation). Both were recoverable with diversification; neither was recoverable with 100% AU shares and 5%+ withdrawal.
Sources & methodology:
Asset class returns from Vanguard/Dimensional AU long-run data series (embedded in
_data/etf_data.json).
AU CPI from ABS 6401.0. Franking credit boost estimated at 0.53%/yr for 100% AU shares (imputation value at 30% company tax, 75% payout franked, effective marginal rate 32.5%). All simulations are historical — not Monte Carlo. Each simulation window slides forward one year from 1901.
This is not financial advice.
Bessembinder (2018) found that over 1926–2016, just 4% of US stocks (90 companies) accounted for all net wealth creation above Treasury Bills.
The other 96% collectively earned zero or negative returns relative to T-bills.
This has profound implications for stock-picking vs diversification.
Below is a Bessembinder-style analysis of the Australian market.
Data note:
This analysis uses yfinance data for current ASX 200 constituents (available since ~2000).
The full ASX history would require hand-curated data including delisted companies — the most important category for Bessembinder-style analysis (survivorship bias affects everything if you exclude failures).
Run
compute_bessembinder.py via GitHub Actions to update with latest data. The pre-computed results below are embedded in _data/bessembinder.json.
Not yet computed — run the workflow.
Key Findings — ASX Analysis
Cumulative Wealth Creation by Stock Rank
Stocks ranked by total wealth created (share price return × shares outstanding).
The curve shows what % of total market wealth creation was contributed by the top N% of stocks.
A steep early rise = extreme concentration.
Top Wealth Creators — ASX
| Rank | Ticker | Company | Total Return | Wealth Created ($B) | % of Total |
|---|
Return Distribution — ASX Stocks
The distribution of individual stock returns is highly right-skewed (a few massive winners, many moderate losers).
This is the mathematical reason why diversification works: you need to hold ALL of the market to ensure you capture the rare big winners.
What This Means for Australian Investors
📈 For ETF Investors
Owning an index fund guarantees you hold all of the rare massive winners like CBA (×132 since 1991), CSL (×900 since 1994), and REA Group (×185 since 2000). A stock picker who held these names correctly would look like a genius — but they also needed to avoid the delisted failures.
Bessembinder's result doesn't mean stocks are bad — it means that diversification across all stocks is essential to reliably capturing the market's positive skew. Holding 10–20 AU stocks dramatically increases the chance you miss the tiny group that accounts for most returns.
Bessembinder's result doesn't mean stocks are bad — it means that diversification across all stocks is essential to reliably capturing the market's positive skew. Holding 10–20 AU stocks dramatically increases the chance you miss the tiny group that accounts for most returns.
☠️ Survivorship Bias Warning
The most dangerous version of this analysis uses only current index constituents — today's ASX 200.
These stocks already survived. The real Bessembinder analysis requires including every company ever listed on the ASX, including delisted failures (ABC Learning, HIH Insurance, Allco Finance, Centro, MFS, etc.) — roughly 3,000+ companies listed and de-listed since 1990 alone.
With survivorship bias removed, the concentration effect is even more extreme than the charts below suggest.
With survivorship bias removed, the concentration effect is even more extreme than the charts below suggest.
📚 Comparison with US Findings
Bessembinder's original finding: top 90 US stocks (4%) → 100% of net wealth creation above T-bills (1926–2016).
Top 50 stocks (2%) → majority of gains. Apple alone created more wealth than the bottom 1,000 stocks combined.
For Australia, the concentration is somewhat lower (our market is smaller and more resource-heavy, spreading returns across fewer sectors) — but the pattern is directionally the same. CBA, CSL, BHP, RIO, and Macquarie together account for a disproportionate share of total ASX wealth creation since 1990.
↗ Bessembinder (2018) — original paper
↗ Summary — Investment Office
For Australia, the concentration is somewhat lower (our market is smaller and more resource-heavy, spreading returns across fewer sectors) — but the pattern is directionally the same. CBA, CSL, BHP, RIO, and Macquarie together account for a disproportionate share of total ASX wealth creation since 1990.
↗ Bessembinder (2018) — original paper
↗ Summary — Investment Office
📋 How to get live data:
Copy
compute_bessembinder.py to .github/workflows/scripts/ in your repo.
Add it to daily-update.yml (already done — runs Sundays).
On first run: trigger via GitHub Actions → workflow_dispatch → "Compute Bessembinder ASX Analysis".
The script writes _data/bessembinder.json and Jekyll injects it at build time.
Until then, the charts below show representative pre-computed estimates.
Run the full analysis:
Add
compute_bessembinder.py to .github/workflows/scripts/ and trigger via workflow dispatch.
The script downloads price history for all ASX 200 constituents via yfinance, computes wealth-creation contribution per stock, and writes results to _data/bessembinder.json.