3 ms·

I don't see how one fifty year period means the next thirty year period will be the same (the time I need my investments to appreciate to fund my subsequent ret

I don't see how one fifty year period means the next thirty year period will be the same (the time I need my investments to appreciate to fund my subsequent retirement). Also, as an individual I don't have time to wait-out a 5-10 year bust if I need to retire.

tim333 12y ago
There have been a lot of studies, see for example the book Stocks for the Long Run showing stocks beat bonds over pretty much any 50 year period in history for any country. It's just the nature of things - stocks will have high returns because investors won't invest otherwise and paper money will lose value because governments print more of it. If you asked Buffett's investment recommendation to an individual in the US he'd probably say buy a house on a 30 year fixed mortgage. As he's pointed out in interviews the rates are very good.
- runeks 12y ago
  I doubt anyone is surprised that stock sees higher returns than Treasury bonds. A Treasury bonds is, arguable, the world's most secure asset. Consequently, it gives you the world's lowest (USD) yield. Bonds, in general, are loans secured by collateral, while buying stock is just buying a slice of a company. Of course the former will have a lower return, as you only lose your principal if the company defaults. Whereas when you buy stock, you have no such guarantee.
dredmorbius 12y ago
There's a lot of variability. In the U.S., since 1920, there have been periods of up to 20 years in which net stock market returns were negative. Ed Easterling's study was published in The New York Times a few years back (and I believe Easterling updates it periodically): http://www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-graphic.html http://www.nytimes.com/interactive/2011/01/02/business/20110... That is, however, U.S. stock market performance. Other countries have seen much greater volatility and long-term downward trends. Japan's Nikkei average remains at one quarter of its 1990 high, and is at roughly one half its 1995 level: http://www.intmath.com/exponential-logarithmic-functions/dow-jones-industrial-ave-graph.php http://www.intmath.com/exponential-logarithmic-functions/dow... http://intmstat.com/exponential-logarithmic-functions/nikkei-225-to-sep2011.png http://intmstat.com/exponential-logarithmic-functions/nikkei...

tim333 12y ago

There have been a lot of studies, see for example the book Stocks for the Long Run showing stocks beat bonds over pretty much any 50 year period in history for any country. It's just the nature of things - stocks will have high returns because investors won't invest otherwise and paper money will lose value because governments print more of it. If you asked Buffett's investment recommendation to an individual in the US he'd probably say buy a house on a 30 year fixed mortgage. As he's pointed out in interviews the rates are very good.

runeks 12y ago
I doubt anyone is surprised that stock sees higher returns than Treasury bonds. A Treasury bonds is, arguable, the world's most secure asset. Consequently, it gives you the world's lowest (USD) yield. Bonds, in general, are loans secured by collateral, while buying stock is just buying a slice of a company. Of course the former will have a lower return, as you only lose your principal if the company defaults. Whereas when you buy stock, you have no such guarantee.

dredmorbius 12y ago

There's a lot of variability. In the U.S., since 1920, there have been periods of up to 20 years in which net stock market returns were negative. Ed Easterling's study was published in The New York Times a few years back (and I believe Easterling updates it periodically): http://www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-graphic.html http://www.nytimes.com/interactive/2011/01/02/business/20110... That is, however, U.S. stock market performance. Other countries have seen much greater volatility and long-term downward trends. Japan's Nikkei average remains at one quarter of its 1990 high, and is at roughly one half its 1995 level: http://www.intmath.com/exponential-logarithmic-functions/dow-jones-industrial-ave-graph.php http://www.intmath.com/exponential-logarithmic-functions/dow... http://intmstat.com/exponential-logarithmic-functions/nikkei-225-to-sep2011.png http://intmstat.com/exponential-logarithmic-functions/nikkei...