All Ordinaries Index

Today, I will explore one of Australia's biggest stock market indexes. The All Ordinaries Index.

What is the All Ordinaries Index?

The All Ordinaries Index (All Ords) is a stock market index representing the 500 largest companies on the ASX by market capitalization. With the ticker: XAO

All Ordinaries History

The All Ordinaries index was the primary index used in Australia until the ASX 200 was published in the year 2000. The S&P/ASX 200 is made up of 200 of the largest companies listed on the ASX.

The All Ords was the primary stock market index in Australia from 1980-2000.

It was the first index in Australia to cover the entire Australian stock market, signalling the end of the smaller regional indexes. The index had a starting value of 500 and trading began on the 2nd of January, 1980.

All Ordinaries Performance

From Feb 4th, 1985 to the same day in 2019, the All Ordinaries index has grown at a compounded annual rate of 6.21%. With an average dividend of 4.3%. Giving the index an average compound annual growth rate of 10.51% during this period.

At this rate, a $10,000 investment in 1985 would be worth $298,988 in 2019. This amount would be $812,212 after another 10 years if the trend were to continue.

All Ordinaries vs ASX 200

The All Ords and ASX 200 are great indicators of Australian equity performance, but both indexes have their weaknesses.

I like the All Ords because it tracks 500 companies (much like the S&P 500) and is also market cap weighted. So, while it does track some smaller companies that the ASX 200 doesn't, the market cap weighting gives it a similar pattern to its bigger brother.

The S&P/ASX 200 is managed by Standard and Poor's—meaning companies have to meet certain requirements before being included in the index. Consequently, providing the ASX 200 with 200 of the largest companies on the ASX—that meet certain liquidity and other performance related requirements.

Whereas, the All Ordinaries Index simply grabs the top 500 companies by market cap and compiles them into an index.

All Ordinaries ETFs

The are currently no ETFs tracking the performance of the All Ordinaries index; however, there are many ETFs tracking the S&P/ASX 200 if you are still interested in gaining exposure to Australian equity markets. As listed below: