Click to enlarge
Source: J.P. Morgan


I am starting to take a closer look at Equity valuations — but before we do the deep dive into that issue, lets quickly see how different asset classes have returned over various rolling holding periods.



Click to enlarge
Source: J.P. Morgan


Category: Investing

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

15 Responses to “Historical Returns by Holding Period”

  1. NoKidding says:

    Chart 1: I would like box plots around those range bars. JMP?

  2. denim says:

    Starting out with a $100,000 investment makes for simple math. But wouldn’t one have to have that as an inheritance to be realistic? What about modest, periodic weekly or monthly investing amounts over 20 or 30 years.

    • tagyoureit says:

      $100,000 / 360 months = $277.77/mo

      360 mo @ 8% = $413,988.74

      in excel

  3. super_trooper says:

    would be nice to see inflation adjusted numbers for the top graph.

  4. rd says:

    Execution matters.

    The bottom figure from JPM has to be taken with a bit of a grain of salt. The pie chart on the left has been able to be executed relatively easily by the average investor over the past couple of decades. The one on the right, not so much.

    Items like the commodities have investment vehicles that exhibit very different actual performance than the index. There have been numerous issues with roll management, backwardizations of the futures market etc. that mean that your index fund can be losing money while the price of the commodity is climbing. I have also yet to see an actual equity market neutral fund that lived up to its hype.

    If you can’t show a pie chart with liquid mutual funds or ETFs with good track histories of achieving within about 0.2% annualized of their index over time, then that asset class should not be included in a pie chart for anybody who can’t run the daily operations of their own hedge fund themselves.

  5. nofoulsontheplayground says:

    That more diversified portfolio is missing an important component – the S&P 400 mid-cap.

    During strong, positive trending markets, the S&P 400 mid-cap is a high beta turbo charger.

    • rd says:

      The Equity Market Neutral and Commodities corners are where your S&P 400 might go.

      However, there are more fees associated with Market Neutral and Commodities than for a mid-cap index fund, which makes them much more appropriate for your portfolio.

  6. b_thunder says:

    Maybe one can’t reliably time the market, but I really doubt that bonds purchased today will earn anywhere near 6.3% annualized for the next 20 years. And imagine the state of the economy and the household balance sheet (heating, AC, gasoline) if oil again returns 8.1% for next 20 years! (hard to imagine other energy sources NOT tagging along.)

  7. peterkrause says:

    I look at that poor tiny blue bar, the average investor at 2.3%, and I hear the voice of Morgan Freeman in Shawshank, remembering his 16 year old self, and saying, I want to reach out to that boy, I want to talk some sense into him.

    What if the Average I could, against the whisperings of all his demons, latch onto that “more diversified portfolio” with all its competitive advantages of returns and deviations, and compell himself to stay fully allocated and periodically re-balanced. Seven-seventy-two, minus inflation at two point five, minus your fee at 1 percent, minus effective tax rate (really rough approximation, live in NJ, itemize deductions, own my home, etc.) about 30 percent, leaves a net real return of just under three percent per year. Which means Average I doubles his money in 24 years. Still probably gonna have to count on partial Social Security and wear the orange apron well into his sunshine years. Still scrabbling around for a competitive advantage somewhere.

    If he were to pocket your fee, he could double his money in 18 years instead of 24. There is no reason to doubt the accumulated data represented by your most excellent charts. Am I missing something? Isn’t it just that easy?

  8. peterkrause says:

    I can copy the “more diversified portfolio” on my wall with a box of crayons, and double my money in 18 years if I don’t pay you a 1% fee. And with the time saved reading blogposts and comments I can take that second job with the orange apron so I don’t have to move out of NJ. So, things are looking up. Thanks.

  9. Blissex says:

    Somehow a lot of people think that some asset class can grow indefinitely twice or three times as fast as GNP; that by the magic of the stock market (or real estate, or dotcom shares, or gold), everybody can earn from their investment 6-8% a year while GDP grows 2% a year.

    The plans to privatize pensions are based exactly on that assumption.


    • You make the false assumption that GDP is correlated with returns. Except over the longest period of time — decades — it is not.

      China grew GDP 6.5% this year, 8% last year, 10% the year before — how did their stock market do?


    • rd says:

      Something like the stock market has two components to it:

      1. Asset base – this can be physical or intellectual property
      2. Income

      GDP is roughly the economic output in a year. If you just spend your money on going out for drinks every night, you won’t have much to show for it at the end of the year, although you will have created some jobs for people that year. If you took some of that drink money and invested in something that you could generate income from in the future (farm, factory etc.) then you have an asset that can create income from itself as well as your other activities.

      Buying a stock, you are effectively buying an asset base that will generate income, some of which will be re-invested. The price of the stock will be some price associated with its assets and some price associated with its ability to produce current and future income. A growing asset base means the total price can outpace GDP over time, although usually not as much as the advertisers would like you to think.

  10. fiendishoc says:

    The bottom range for the 5 year rolling return on stocks looks way too tame, considering if you bought in 2004.