Long, long ago...

Long, long ago in 1900, tired clerks in various parts of the world typed up the share prices of stocks in their region in their ledgers. For decades their paperwork lay gathering dust until a few intrepid academics started to piece together the historical returns of investments.

Many of us never question our almost automatic assumption that buying shares in public companies is a great way to invest. The theory behind this thinking is that it’s best to bet on economic growth. The best way to access the returns of economic growth is to buy shares in companies that are public and therefore under the scrutiny and stewardship of public agencies, shareholders and accountants.

That’s a nice theory, but being a data nerd I’ve started looking at historical investment returns since I started this blog. Is the stock market really the best way to invest?

Two pieces of research that other (cleverer) people have pointed me to multiple times are as follows:

1. Credit Suisse Global Investments Return Yearbook 2018

This should actually be called the London Business School Global Returns Yearbook as the researchers are Dimson, Marsh & Staunton, three professors who have been studying historical returns for decades. My guess is that Credit Suisse pays a lot of money to have the report rebranded in their name, but it really is worth looking at. I wonder if anyone would pay me lots of money to rebrand a blog post in their name?

The authors go back to 1900 and find that global equities returned the highest gains in the last 118 years, even higher for US stocks. They have been publishing their findings since 2002.

Here’s a summary of the findings as presented in The Economist. They managed to massage the graph into showing wine as a very good investment as well! Don’t get too excited as you would have to select, store and then NOT drink your wine investments for decades to realise these returns. It’s probably just me, but I don’t keep company with anyone who could meet that last criterion.

The Economist, Feb. 21, 2018

The Economist, Feb. 21, 2018

You can download the summary of the report here.

2. Sarasin’s Compendium of Investment

Sarasin & Partners also produces an annual report of investment classes around the world. It’s useful to long term investors such as charities and endowments, but I think astute individual investors would benefit from looking at what works in the long, long term as well.

The report has been published since 1997 and you can download it here.

Perhaps 118 years from now some yet unborn soul will unearth this blog post and think of me laboring away on a sunny day in London?

Thanks,

Mallika