Stocks have returned about 7% above the rate of inflation for the past two hundred years. And in twenty year periods, they have outperformed bonds about 90% of the time.
However, these statistics conceal important 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%. Actual 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 195, 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 not a panacea, It’s more luck than a sign of investor ability.
No comments:
Post a Comment