More Historical Stats

In the olden days, investors tended to look at stocks similar to the way we look at bonds today — it was all about yield. Stocks often traded around $100 a share (or whatever the par value was) and you waited to hear from the board what the annual or semi-annual dividend was. Retained earnings were so small as to nearly be irrelevant.
The idea of expecting continuous capital gains is something fairly new. According to data from Ibbotson, the market’s annualized capital gain from 1824 to 1942 was 0.90%. Dividends, however, grew by 5.90%. Since 1942, capital gains have grown by an average of 7.33% while dividends have grown by 3.75%.
Inflation has obviously been much higher since 1942 than before (3.93% to 0.47%), but the distribution of the market’s overall gain is what I find most striking.

Posted by on March 29th, 2010 at 2:44 pm

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.