November 19, 2015

The Historical Reward for Courage and Patience

It takes courage and patience to invest in stocks. Fortunately, those investors who possess these characteristics have usually been compensated for their efforts.

Historical Odds of stocks beating cash

(Click on image to enlarge)

U.S. large cap stocks (as represented by Ibbotson SBBI Large Stock Index) have outperformed T-bills in 65% of calendar quarters since 1926. If you measure in 20-year holding periods, U.S. large cap stocks outperformed 100% of the time. How much outperformance have stocks experienced historically? Looking at the entire 89.75-year period, U.S. large cap stocks earned an average annualized premium of 6.6% over T-bills. That’s worth a little courage and patience!

“Traditionally the investor has been the man with patience and the courage of his convictions who would buy when the harried or disheartened speculator was selling. If the investor is now to hold back until the market encourages him, how will he distinguish himself from the speculator, and wherein will he deserve any better than the ordinary speculators fate?”

~Benjamin Graham