Tuesday, July 31, 2012

Stock Market Returns ... Surprised?

Stocks have performed really poorly these past ten years or so. Right?

Maybe not. Here's a table showing the rolling average over multiple ten year periods.

S&P Rolling Ten Year Returns: Better Than You Think has the details:

"While the period from March 2000 through now has been classified as the dark ages for investing, the rolling ten year returns for the S&P 500 hit their highest levels since January 2008 this month.

The chart below shows the historical rolling ten-year returns for the S&P 500 going back to 1938.

As shown in the chart, the returns have been rebounding from multi-decade lows in the last couple of years and are now up to 51.9%. In other words, $100 invested in the S&P 500 ten years ago this month is worth $151.9 today.

Before we start calling it a golden age for equities, though, we would note that a big reason for the current positive level is the fact that this Summer also represents the 10-year anniversary of the end of the dot-com bear market that went from Spring 2000 through Summer 2002.  Time sure flies when you're having fun.  Doesn't it?


My Take

Equity investing is a long term proposition. It's a good bet, too.

Even when it's "terrible," it's still pretty good.

Especially when compared to other forms of investing.

And you can always sell and stop playing whenever you decide to do so.

Unlike real estate and other illiquid investments.

That ability to take the money and run, even if it's not intended to be and never is actually used.

Thanks. Bob.


  1. Is one gaining wealth in the stock market or just treading water? Does not the continued erosion of the purchasing power of the dollar offset any "real" gain provided by the market over time? "Treading water" might be the best that one can do...and, not necessarily bad and certainly better than the alternative with market investing...but, are we "gaining?"

  2. Historically, the stock market has returned almost 7% annually in inflation adjusted terms. Even during the past ten years, it returned nomnally 51%.

    In my view, most individuals don't realize anyhere near those returns because they pay (1) "experts" fees and trading commissions of approximately 10%-20% of the pre-expense returns, (2) they put a substantial amount of money in underperforming bonds and (3) they trade too much at the behest of the experts or brokers and get in and out of the market at inopportune times.

    Jeremy Siegel's book "Stocks for the Long Run" is in its fourth or fifth printing and explains all this, historical performance included, very well. You may wish to check it out.

    Thanks for your comment. Bob.