How have stocks performed?

by: Daniel P. Matthews

Stocks have been a strong ingredient in helping individuals achieve financial independence. When viewed by decade throughout the twentieth century, stocks have consistently yielded a positive return. Historically, there have been individual years in which the market has been a negative performer. If you can afford to stay the course for the long term you are usually rewarded, and stocks are no exception.

The following table portrays the Annual Return by Decade over the past century for stocks as calculated by Mr. William T. Spitz.

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One thing is clear from the table; stocks are historically strong performers. If a bull market is one that is strong and growing and a bear market is a time of weakness and loss in the stock market, then the twentieth century has been a bull market. On average, bull markets outlast bear markets, some 60 months for bulls to 14 months for bears. Using the data in the table we can calculate the return for the period of 1901 through 1990. The return is 10.1 percent. A far sight better than banks and savings institutions pay on your savings accounts. The 10.1% rate is better than the inflation rate. Of course outperforming the inflation rate means our money is growing - and the price paid for this growth is investing and patience. Stocks, like many other investments, should be viewed as a long term investment not played as a short term opportunity.