Thinking About Thinking

How well have US stocks performed? 

With another decade in the books, here’s the quick compounded annual return of the S&P 500 for 50 years:

• Last 10 years: -2.9%
• Last 20 years: 6.1%
• Last 30 years: 8.3%
• Last 40 years: 6.5%
• Last 50 years: 6.2%

Here’s the compounded annual return of the Dow Jones Industrial Average for 50 years:

• Last 10 years: -0.5%
• Last 20 years: 7.0%
• Last 30 years: 9.0%
• Last 40 years: 6.7%
• Last 50 years: 5.8%

And finally, the compounded annual return of the Nasdaq Composite over 30 years:

• Last 10 years: -5.7%
• Last 20 years: 8.4%
• Last 30 years: 9.5%

People used to say that stocks generate about 8%+ annual returns over the long-run.  It seems fairer now to say that stocks generate 6%+ annualized returns over the long-run.  That type of return doesn’t blow my mind given inflation and capital gains tax though it’s still better than a lot of things.  I also have to think that the next 10 years will be better than the last 10 years.