|
STOCK RETURNS VARY BY DECADE
May 03,2007 00:00
by
admin
STOCK RETURNS VARY BY DECADE Stock market returns are not consistent; in fact, they vary all over the map. That fact is what drives investors crazy. They never seem to know if they should be buying or selling. Listening to the advice and predictions of the Wall Street crowd further confuses investors. If investors are fully invested during up trends, they can experience excellent returns. Unfortunately, the down trends can take away a good portion of their gains, if they just follow the buy-andhold approach. Consider the wide variance in average annual stock market returns during the seven decades since the 1930s, shown in Table 1-2. The 1950s, the 1980s, and the 1990s produced above-average returns in the neighborhood of 18 percent, while on the flip side the 1930s, 1960s, and 1970s provided less-than-stellar returns, around 6 percent or less. The 1940s provided a return close to the 10.2 percent annual return of stocks between 1926 and 2002. As you can see, the 1995–1999 period was an anomaly, which produced abnormally high returns for those who stayed fully invested during that time period. Since the beginning of 1995, had those same investors , TA B L E 1 - 2 S&P 500 Decade Performance Statistics Decade Average Annual Return* 1930s 0.05 percent 1940s 9.17 1950s 19.35 1960s 7.81 1970s 5.86 1980s 17.55 1990s 18.21 Other periods: 1995–1999 28.45 2000–2002 14.59 been holding their stocks and mutual funds through October 9, 2002, they would have sustained substantial losses, depending upon their investment portfolio mix. (Remember that many investors had high exposure to the technology sector.) |