I saw a chart that I thought you might like. It shows very well how the stock markets deliver gains over the long term, but probably more importantly that they do not go in a straight line.
We all know by now that investing in shares can be a roller coaster ride. Economic theory would tell us that for a higher return we need to take higher risks. The chart below certainly illustrates that.
However what is intriguing and exciting to see from this chart is that for long periods of time the stock market really delivers very little. The periods from 1913-1922 (9 years), 1936-1950 (14 years), 1971-1982 (11 years) and 1999-now(?) have all been pretty stale. However immediately after those periods investors have been rewarded with returns via periods of significant growth. When investment strategies are based on buy and hold to a large extent, I guess that’s what it means.
Of significance for investors right now is that we may potentially be coming to the end of a pretty dismal 13 year period and could well be entering a very exciting period in stock market history. I have written previously about my view of emerging markets driving world growth and investment returns over the next economic cycle. I think any investor should be excited by this possibility and the chart below.
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