It is important to note that "cherry picking" time frames very much influences price performance of investments! I am trying to show both long-term price patterns (20 years) as well as medium term patterns (3 years), but I will comment on price movements for other time frames as well.
Common stocks of US companies are a major component of almost all funds (pensions & retirement funds, mutual funds for general investors, etc.). The "S&P 500" stock price index is probably the most commonly referred to index of investment pros (as the Dow Jones Industrials index has various well-known problems and is limited to just 30 companies).
The below chart shows the performance of the S&P 500 over the last 20 years or so (last price 2063 last Friday, 21 Nov). Over this particular long period, the performance of the S&P is pretty close to its "long term average" of about 8% per year (not including dividends, nominal dollars (does not include inflation)).
8% plus dividends is not bad at all! For 20 years... Compared to many other longer-term investments, that is hard to beat.
If we look at the shorter-term, the percentage gains are even better. "Exquisite timing" of buying at the March 2009 lows until now would yield a spectacular return of around 20% per year!
Just looking over the last three years ("weekly chart", from stockcharts.com) is spectacular in its own way as well (*click* this or any image for a clearer view):
Woooowww... That is one of the most spectacular (unusual) charts I have ever seen. The S&P 500 has gone almost straight up since about January 2012. Why, it almost looks manipulated!
Doing the (approximate) math tells us that the S&P 500 is up about a mighty 20% per year (again not including dividends). This pretty much matches the gains since the lows of March 2009.
20% per year (plus dividends, call it 1% more yields a total gain of some 21% per year) is a return very rarely seen among legitimate investments.
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GOLD is perhaps the Bears' best investment. I hold a pretty fair amount of gold. I have owned physical gold since the late 1980s. Most gold that I have bought has been since 2002, I have bought fairly regularly (and in about the same quantities). Here is a 20 year chart of gold:
Gold's price has been going up an average of about 6% in the above period. Here are a couple of other quick comments on the two 20 year charts (S&P 500 vs. Gold):
-- the charts look very different even though BOTH are up moderately
-- stocks being up some 8% per year (vs. gold at 6%) is a MUCH better performance
And, to illustrate gold's performance over the past three years (stockcharts.com):
* * *Below is a chart showing performance of both gold and the S&P 500 over the past 20 years, this is just a combination of the earlier two charts.
Stocks outperformed gold from 1994 to about January 2008. Gold then was better until mid-2011. And more recently stocks have performed better. Being curious, I ran the 20 year data to get a correlation coefficient of 0.486, values around, say, 0.400 to 0.600 are considered "moderate" correlations by the statisticians. But, 0.486 for asset price increases for a 20 year period is rather low, remember that almost all prices are up over 20 years...
Below is a similar chart, but only for the past three years:
Mmm... Gold has gone down over the past three years while stocks have gone up. Granted, three years is not a long time, at least for this three year time frame, stocks have performed much better than gold. Correlation coefficient: an impressive -0.912! Stocks have been in favor, gold out of favor.
For this three year period, we BEARS (defined as bullish on gold and bearish on stocks) have been wrong!
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There are lessons to be learned here...
One topic I have written about at some length (and from different viewpoints) is on the idea of diversification. I continue to believe that a proper diversification is a key to maintaining good and less risky returns on investments. If I had had the "courage of my convictions" and gone "All Inn" on buying gold, say, three years ago, I would be down... I am going to state that for all but a tiny minority, diversification is a better investment idea than concentration.
Secondly, all of the above analysis is looking at the past... I still believe that we are in for rocky times ahead (even if I have believed THAT for a long time). It is possible that we BEARS may be right before long. *
* Even broken clocks are right twice a day.
Um, do some of us see a "Part Two" coming...?