I am now slowly reading the book, “The intelligent Investor”, by Benjamin Graham. He is the inventor of value investing, and Warren Buffet was one of his students.This book was written in 1973, but the lessons in it are timeless. One thing that came up is although we can say, that stocks have returned 9% per year from 1929 till now, what they don’t tell you, is there are long periods where it returns much more than that, and long periods where it returns much less. I am going to try and show some periods.Now, note that I don’t think his rates include dividend reinvestment, but they also don’t include inflation. Inflation for the last 40 years averaged 3.22%, and dividends, for the period he studied were about the same, so I am going to consider that a wash. From 1900 until 1924, the real rate of growth for stocks in the US was 3%. That means, the after inflation rate. From 1924 until 1949, the real rate of growth was 1.5%. From, 1949 to 1968, the real rate of growth in the stock market was 11%.I will add in a few more periods, that I know myself. From 1966 – 1982, after inflation, which was very high during that period, you actually lost a lot of money. After taking into account inflation, I have heard it argued that it was worse than the great depression.From 1982 – 2000, inflation was low, so the real rate of return was about 18% per year compounded. Finally, from 1999 – 2009, for the s and p 500, the returns were negative. First, I will admit, that these numbers are my guess. I have not calculated them using exact inflation numbers, and exact dividend numbers, but I think the numbers are close. More to the point, what this shows is that there are long secular bull markets, and long secular bear markets. Put another way, someone who did 5% worse than the market from 1982 – 2000, would do much better than someone who beat the market by 5% per year from 1966 – 1982.The moral of the story is that success in the stock market is more due to when you are investing, than how good you are.
In the end we are all market-timers in sense. We are born at a point in history and everything else is based on that. That's why it was so hard for me to grow up to be a cowboy. And impossible for Jesse James to grow up to be radar operator.
Hi Mark,Well done for reading this one, what a superb book. Yet the US market returns were actually much more stable than you are thinking, and with no trend-change in theperformance over the entire 1880-2017 period, once the substantial changes in inflation is accounted for. I wrote about it today at the MD board:https://boards.fool.com/us-market-real-total-returns-3421238...- Manlobbi
I will check it out. Thanks for bringing it to my attention.
Hunt down "Triumph of the Optimists" for updated and more complete data
Hunt down "Triumph of the Optimists" for updated and more complete dataThe Optimists is from 2000 and out of print. Better reviews on the same subject.Stocks for the Long Run 5/E: The Definitive Guide to Financial Market Returns & Long-Term Investment Strategies by Jeremy Siegel. The 2014 edition covers the 2008 crisis.Chapter 5 covers stock and bond returns from 1802 including the major industrial countries.(I'm an edition behind).https://www.amazon.com/Stocks-Long-Run-Definitive-Investment...RAM
They update "Triump of the Optimists" each year so it is hardly out-of-date. https://abnormalreturns.com/2019/03/01/the-2019-credit-suiss...
"They update "Triump of the Optimists" each year so it is hardly out-of-date.Well thank you, I was unaware there was an update available. Unfortunately Credit Suisse makes the full version of the book only available to clients (with at least 50,000 euros). However I see they do have a very nice 43 page abridged version free for download which I am looking over. RAM
However I see they do have a very nice 43 page abridged version free for download which I am looking over. RAMThis must be it... here's a link.https://www.credit-suisse.com/media/assets/corporate/docs/ab...heink
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