Stocks, Bonds, and Gold: Historical Charts Since 1800

Posted on December 16, 2019 // 6 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

StarCapital Research has shared a series of interesting long-term charts comparing the long-term returns, drawdowns, and volatility of stocks, bonds, and gold over the last 220 years. There are also some stats on relative market valuations and forward return expectation for different countries and regions. You must accept some terms before viewing, but it is available to US individual investors.

Here is a sample chart of the return distributions of stocks, bonds, and gold since 1800, depending on holding period, along with their takeaway, via Norbert Keimling @CAPE_invest:

Conclusion: For periods of 10 years or more, stocks are safer than bonds or gold!

This is because for a 10-year holding, the worst inflation-adjusted performance of stocks (-5.9% annually) was better than the worst performance for bonds (-6.4%) and gold (-10.1%). The problem is that during a specific 10-year timeframe where stocks did that poorly, it’s quite likely that bonds or gold did great! Which means that it would still be quite difficult to keep holding stocks through such a period of poor performance. In a fearful environment, “sell stocks and wait things out” will start sounding like much wiser advice than “buy and hold”.

Of course, stocks can recover quite quickly and you might miss it while you’re waiting:

(There is also an ongoing debate about the validity of “time diversification”. Do stocks really become “safer” the longer you hold them? They can still go down 50% at any given time, so if you need to sell in the near future, they are never really safe.)

After doing this for a while, I don’t know if someone can simply read a book and “learn” how to keep the faith during the scary bits. It takes some time and making some mistakes to develop a portfolio where you understand its limitations and how long and how badly it can act in the short-term. I’m still learning.

Filed Under: Investing //
Last updated: December 17, 2019
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

User Generated Content Disclosure: Comments and/or responses are not provided or commissioned by any advertiser. Comments and/or responses have not been reviewed, approved or otherwise endorsed by any advertiser. It is not any advertiser's responsibility to ensure all posts and/or questions are answered.

Comments

  1. Srian says
    December 17, 2019 at 3:19 am

    I think you meant to say over 20 years as the bond and gold numbers are for 20 years but the stock returns listed in your text is for 10 years.

    Reply
    • Jonathan Ping says
      December 17, 2019 at 9:27 am

      Sorry, I meant to convey the reasoning behind their conclusion that “For periods of 10 years or more, stocks are safer than bonds or gold!”. I have edited it to:

      This is because for a 10-year holding, the worst inflation-adjusted performance of stocks (-5.9% annually) was better than the worst performance for bonds (-6.4%) and gold (-10.1%). The problem is that during a specific 10-year timeframe where stocks did that poorly, it’s quite likely that bonds or gold did great! Which means that it would still be quite difficult to keep holding stocks through such a period of poor performance. In a fearful environment, “sell stocks and wait things out” will start sounding like much wiser advice than “buy and hold”.

      Reply
  2. Jonathan says
    December 17, 2019 at 4:07 am

    I think you have a typo on worst bond percentage. I got confused!

    Thanks for the great content over the years, Jonathan.

    Reply
  3. kevin says
    December 17, 2019 at 4:57 am

    I don’t understand the first chart. It is labeled as a “distribution”, but appears to only be the max and min return over a 10 yr period. Assuming this is the case, this seems like a bad way to determine investing performance–we’d really want to see the distribution of all the middle years between the min and max.

    I suspect gold is actually a much worse investment then we would draw from this chart.

    Reply

Speak Your Mind

*