When people talk about investing in shares, they usually focus on one thing - Growth. Share prices rising. Capital gains. Market performance. But that focus hides one of the most important, and misunderstood, levers in long-term investing, particularly in Australia.
Where your returns come from matters just as much as how large they are
Equity returns are made up of:
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Capital growth (the share price going up)
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Income (dividends paid along the way)
Over long periods, the Australian share market has delivered roughly:
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~7% per year from capital growth
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~3% per year from income
On the surface, growth looks like the hero, but here’s what rarely gets discussed. Capital growth is highly unpredictable. It’s driven by sentiment, valuation, and market cycles. Income, by contrast, is remarkably stable.
Historically:
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Capital growth standard deviation sits around 15% per year
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Income standard deviation is closer to 0.5%
That’s not a typo. Both come from the same market. Both contribute to total return. But they behave completely differently.
Why This Matters
Most portfolios are unintentionally growth-heavy, even when they’re labelled “balanced” or “moderate”.
That means:
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More reliance on market timing
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Larger drawdowns during downturns
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Greater behavioural pressure on investors
Income acts as a stabiliser. It smooths returns, reduces reliance on selling assets, and lowers the emotional cost of staying invested. This doesn’t mean income-only strategies are superior in all cases. It means how returns are delivered matters far more than most people realise. This conversation matters even more in Australia because our market is structurally different.
Australian equities:
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Have a strong dividend culture
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Are dominated by mature, cash-generating companies
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Offer franking credits that materially improve after-tax outcomes
Yet many investors treat income as secondary or even as a sign of being “too conservative”. In reality, income is often the reason portfolios hold together during periods of stress.
Capital growth tends to look impressive in hindsight. Income tends to look boring in comparison.But boring is often what allows investors to:
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Stay invested through downturns
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Avoid selling at the wrong time
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Maintain discipline over decades
Over long horizons, those behavioural advantages compound just as powerfully as returns themselves.
This isn’t an argument for income instead of growth. It’s an argument for understanding where your return is coming from, and how that affects risk, behaviour, and outcomes over time. Growth gets the attention. Income quietly does the work. In the Australian market, that quiet work often makes the difference.
If you’d like to explore how income-focused strategies can be used deliberately — rather than incidentally — within an Australian portfolio, professional advice can help bring that balance into focus.
You can learn more about how this approach is applied in practice at What If Advice.
Luke Morris BCom(FinPlan) is an Authorised Representative (001271688) of WIAA T/A What If Advice Pty Ltd, a Corporate Authorised Representative of Beryllium Advisers Pty Ltd AFSL 528250.
Disclaimer: This article contains general advice only and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement
