The All Ordinaries Index (XAO) is one of the most often cited benchmarks when talking about the performance of the Australian stock market. The XAO Accumulation Index is a less well-known but no less significant variant of it. Here’s why this index is important: it provides a more thorough picture of investor returns.
Understanding the All Ordinaries (XAO)
The All Ordinaries Index, often just called the “All Ords,” is a market capitalization-weighted index that tracks the performance of the largest 500 companies listed on the Australian Securities Exchange (ASX). It provides a snapshot of the general health of the Australian share market.
However, the standard XAO index only reflects price movements of stocks — it does not include any income investors receive from dividends.
Enter: The XAO Accumulation Index
The XAO Accumulation Index (sometimes referred to as the All Ordinaries Total Return Index) goes one step further. It tracks not only the price changes of the companies in the All Ords, but also assumes that all dividends paid out by these companies are reinvested back into the index.
In other words, it reflects total shareholder returns — both capital gains and dividend income.
Why is this important?
Many Australian companies pay out healthy dividends, especially in sectors like banking, resources, and telecommunications. Over time, these dividend payouts — when reinvested — can make a significant difference in overall investment returns.
Consider this:
If you invested $10,000 in the All Ords in 2000 and only looked at price appreciation, your returns would look quite modest. But if you’d reinvested every dividend you received, your accumulated wealth would be substantially higher, thanks to compounding.
Comparing the Two
| Metric | XAO Index (Price) | XAO Accumulation Index |
|---|---|---|
| Reflects Capital Gains | ✅ | ✅ |
| Reflects Dividends | ❌ | ✅ |
| Shows Total Return | ❌ | ✅ |
| More Accurate for Long-Term Investors | ❌ | ✅ |