The Best Performing Stocks For The Last 100 Years

In today’s video we discuss the top performing stocks of the last 100 years. Which countries have had the best performing stock markets, and which factors drive outperformance.

Welcome back to patrick boyle on finance we talk quite a bit about the stock market how to invest and market history around here so a logical question for us to answer is what were the best long-term investments over the last hundred or so years the world was quite a different place in 1900 elon musk had not yet invented the electric car the train or even the

Tunnel now when i did my master’s degree at london business school i was very lucky to study with elroy dimpson who’s probably one of the greatest experts in the world on the topic of long-term investing returns so let’s look at what we can learn from his research on global markets and asset classes and from the research of hendrick bessembinder from arizona

State university on single stock returns stay to the end for the list of the 10 best performing stocks since 1926. okay so let’s start with dimson marsh and staunton of london business school who every year in association with credit suisse released the credit suisse global investment returns yearbook which analyzes global market returns since 1900 the 2020

Edition gives us the insights gleaned from examining 120 years of global markets data the team look at stocks bonds bills inflation and currency for 23 national markets and for the world as a whole in the last 120 years investments in stocks have given investors the best long-term investment returns solidly beating fixed income investments over this period

Global equities provided an annualized real or inflation-adjusted return of 5.2 percent versus 2 percent for bonds and 0.8 percent for short-term fixed income investments like treasury bills this outperformance when compounded over the 120-year period means that an investor in stocks would have 165 times more money than an investor who would put their money in

See also  Cannabis Stocks Decline in June 2.2% for the 3rd month in a row

Treasury bills that really shows you how much compounded returns matter in the last 120 years there have been two world wars a cold war numerous economic crisis and a lot more but through all of that turmoil stock markets have drifted upwards over time so how have investment returns looked in recent years well inflation-adjusted equity returns since 2000 have

Been okay but below their long-run averages this period with two major bear markets provides a reminder of the risk involved in equity investment but equally it highlights that over any reasonably long period equity investments outperform the lower risk alternatives investors just are compensated for taking risk the yearbook provides many insights it’s one of

The few research reports that i look forward to seeing every year one of the additional insights provided for investors is that when real interest rates are low the returns achieved on all assets tend to be lower in addition an environment where interest rates are declining tends to provide high investment returns in all asset classes with real interest rates

Around zero right now or negative in certain parts of the world the expected return on stocks over the next few years is just equity risk premium now business and the global economy have obviously changed significantly over the last 120 years back in 1900 railroads made up 63 of the united states total stock market value today railroads are a tiny component in

The s p 500 index investors in 1900 had no idea that there would be cars smartphones airplanes cloud computing and all of the technologies that we have today the hot investment sectors change over time and diversification is important for investors if they want to achieve good long-term risk-adjusted returns other insights from the data are that bond investors

See also  The former coal town leading the race for clean energy | FT

Are rewarded for buying longer dated bonds and for taking credit risk as you might expect a reasonable forward-looking estimate of the long-run maturity premium on bonds is approximately one percent per year and in addition high-grade u.s corporate bonds achieve a premium of 0.73 per year the yearbook shows long-run returns associated with five factors namely size

Value income momentum and low volatility these factors have not performed awfully well in recent years with value underperforming growth over the last 31 years while the authors stress the continuing importance of factor effects they warn that factor premiums are by no means guaranteed so which country’s stock markets have performed the best over the last 120 years

The top 10 performing global stock markets since 1900 are in order australia at six point eight percent real return the united states at six and a half percent south africa and new zealand at six point four percent denmark at five point eight percent sweden at five point seven percent canada at five and a half percent finland at 5.4 percent and switzerland and

The netherlands at 5.3 percent the returns are all adjusted for inflation and are presented in us dollar terms the real returns in the local currency of a country could be higher or lower depending on exchange rates over time for example south africa has delivered 7.2 percent annualized returns in its local currency but 6.4 percent when converted to the us dollar

The top three best performing stock markets australia the us and south africa are all commodity-rich nations their natural resources helped them withstand the global turbulence over the last century or so in addition all three have successfully diversified their economies to other industries such as technology and financial services why did australia outperform

See also  11 Insanely Practical Target Buys Under 0 | The Lifestyle Fix

You might ask well there’s no single reason but it is rich in natural resources it suffered minimal damage during the second world war and its strong banking system and services-based economy helped it weather financial crisis better than the u.s and other countries okay so what about single stocks well after analyzing the returns of over 25 000 common stocks

Hendrick bessembinder from arizona state university found that a little over a thousand of those stocks or about four percent of the total generated all of the wealth created for shareholders by the stock market since 1926 when crsp data begins 96 of all stocks collectively performed no better than investing in risk-free one-month treasury bills even more

Surprising is that 50 stocks accounted for well over one third of that wealth generation finding these home run stocks is difficult and many investors rather than trying to find a needle in a haystack just by the whole haystack this research really does reinforce the importance of diversification in an investor’s portfolio so what are the 10 best stocks since

1926 well apple came in at number one followed by microsoft at number two exxonmobil is number three amazon number four google number five johnson johnson is number six walmart is number seven ibm is number eight number nine is berkshire hathaway and number 10 is procter gamble this ranking of course changes over time up until very recently exxonmobil was

Number one and general electric was number four i guess that fact once again highlights the benefits of diversification don’t forget to hit the like button and to subscribe and i’ll see you again soon bye

Transcribed from video
The Best Performing Stocks For The Last 100 Years By Patrick Boyle

Scroll to top