If you could go back in time 100 years and pick an asset in which to invest, which would you choose? Knowing of events like the Wall Street Crash of 1929 and the Great Depression, 7% inflation in the 1970’s, and the stock market crash of 2008, would you still choose to put your money in stocks? If so, you would be making a wise decision.
I recently came across an article posted in the March 2018 issue of The Wall Street Journal regarding the average annual returns of 10 popular investments over the last century. (I included a graph showing these investments and their average historical returns above inflation.)
At first glance, I noticed the negative returns of diamonds. Although diamonds are quite popular, especially on the finger of a loved one, they have been a poor investment if appreciation is the goal.
Bonds, which happen to be fifth on the list behind collectable stamps and high-end violins, show an average annual return of 2%.
Gold, a popular investment among some investors, has historically fallen short when compared to fine art and fine wine; the latter of which post returns over 500% more than that of gold.
Stocks have had the highest returns, and by a large margin. Despite the crashes, recessions, and economic contractions, stocks have had the best return in the last 117 years.
As we face volatility in the markets in 2018, we know that a diversified portfolio of stocks and bonds has weathered the storms of years past.
Despite the risks of recession and downturn in the future, I plan to keep my diamonds on my wife’s finger and my long-term investments in stocks.