When learning about investing, it is good to remember that nearly all the “commonly accepted advice” out there is based on at most 100 years of historical returns. Meanwhile, many of us still have 50 or more years ahead of us. Is that enough data? I’m pretty comfortable with broad patterns such as stocks outperforming bonds over long periods across nearly every developed country. However, as the conclusions get finer I get more and more skeptical.
For example, I wouldn’t bet all my chips on any one country. The world will look very different in 50 years, and I doubt we’ll be able to predict much of it. (Though I’m sure it will seem “obvious” in retrospect.) Take a look at these two charts comparing the relative market capitalizations of world equity markets as of the end of 1899 and 2013.
I’ll check back in around 2050…
Source: Credit Suisse Global Investment Returns Yearbook (via Abnormal Returns)
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Changes do occur everyday in different ways. Interesting graphs by the way.
Change is constant is a true statement here. Very interesting and important perspective. Thanks for sharing.
20th century was an anamoly because of two world Wars and then the cold war. 5% of world’s population can’t control nearly half of world’s stock market indefinitely I predict a more population proportional distribution by 2099