The really long term

People should be looking at as much information as possible before they make investment decisions. Looking back five, 10, or even 20 years may not give the investor a good picture.

Look further back – go back 100 years and you will get everything thrown into the graph – from wars, peace, the cold war, famine, depressions, changing political systems and the like.

Maaten Ackerman, an investment analyst looked at the past 104 years of asset class returns. He suggests that your find the largest sample of data that you can. He maintains though that the best that investors can expect over a long period of time is 3%, after taxes and costs have been deducted, when investing in a diversified portfolio.

Over the long term the assets performed similarly. The USA equity market for example has returned 6% over the last 100 years.

If it is looked at over short terms then there is volatility, and as most investors don’t like past 100 this theoretical study is irrelevant. The trick is to time the entry and exit. Look at the pe ratio and buy low.

Bonds on average returned 1.8% over the 100 years, however the short term volatility is there, but generally bonds are a good hedge in an investment portfolio. Bonds and cash generally battled to deliver significant real returns.