Stocks have returned about 7% above the rate of inflation for about two hundred years. And in twenty year periods, stocks have outperformed bonds about 90% of the time.
But these statistics conceal certain facts. Someone who had invested at the market peak in 1929 would have had to wait until 1998 to reach a return of 10% on their money. That would include dividends. This is an after-inflation yearly return of 7%. Your true returns will differ greatly, depending on the time you actually begin investing in the market.
An S & P 500 investor from 1929 through 1949 received an after-inflation return of about 4.5%. An S & P 500 investor starting in 1932, and holding on until 1951, received an after-inflation annual return of about 10.8%. That works out to over 6% more per year.
Obviously: Luck and chance with regard to time of market entry play a major role, so be mindful of the danger of relying on averages.
And, as I have said in earlier blogs, timing is more luck than a sign of investor ability.
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