Best and Worst 12-Year Investment Periods Throughout History

“Those who cannot remember the past are condemned to repeat it.”

With that in mind, let’s review the past so that we might catch a glimpse into the future.

The three best 12-year annualized forward returns for the S&P 500 (including dividends) going back to 1928 were:

  • 19.0% (1988-2000)
  • 18.3% (1950-1962)
  • 18.2% (1944-1956)

An annualized return of 19% implies a $100,000 portfolio grows to over $805,000 in twelve years!

The three worst 12-year annualized forward returns were:

  • -2.8% (1930-1942)
  • -2.4% (1929-1941)
  • 0.5% (2000-2012)

An annualized loss of 2.8% implies a $100,000 portfolio declines to about $71,000 in twelve years.

For context, the very long-term annualized return for the S&P 500 is around 10%. So we observe there is tremendous amount of volatility in even 12-year periods. Continue reading “Best and Worst 12-Year Investment Periods Throughout History”

U.S. Stock Valuation Update

A reminder that valuations are NOT short-term timing tools. The purpose of monitoring and understanding stock market valuation data is so we can build more accurate financial projections using more realistic assumptions (and therefore make better financial decisions) and to assist with longer-term investment strategy (i.e. 10-12 year time horizons).

In short, folks who are chasing performance higher at current levels by adding more stocks to their portfolios and/or buying low-quality, money-losing companies at extreme prices are either (1) ignorant to market history, or (2) understand the history but are rationalizing today’s dislocations with “this time is different” or, (3) they simply believe they are smart enough to get out in time.

Let’s take a look at the big picture of U.S. stock market valuations that are more excessive than they’ve ever been in history exceeding even the pre-Great Depression peak at the end of the Roaring Twenties and the Dot-Com Bubble Peak.

Image Continue reading “U.S. Stock Valuation Update”