Being a long term index investor is probably not where you should be! Over the last 100 years, there are long periods where stocks significantly outperform an overall average annual return of 10%. These eras are followed by long periods of under-performance. The cycles last between 15 and 20 years. From 1899 to 1915, the market, as measured by the Dow Jones Industrial Average, LOST 30%, or about 2% per year. This was followed by the post-WWI, "Roaring Twenties" market, which peaked in 1929. During that 15-year stretch, the market gained about 14% per year. Then we had the Great Crash, followed by a malaise that we struggled with through 1949. For that 20-year period, stocks LOST an average of 4% per year. The Fifties brought with them a great Bull Market that lasted until 1966. Over 16 years, the market gained about 13% on average per year. The next 16 years were characterized by the war in Vietnam and stagflation. Stocks LOST about an average of 2% per year, but closer to 8% per year when you factor in inflation. And that leads us to the Bull Market that began in 1982 and didn't end until last year. The greatest of all Bull Markets so far, it saw the market gain about 17% per year. I have used interest rates to help define the length of the periods. It appears we've are starting on another extended period of anemic returns especially for long-term index investors.
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