What kind of return can you expect after 20 years in the stock market?

The title is intentionally ambiguous. What we did was the following. We took 4 stock exchanges or indices, one for each wind direction (as below) to represent the Americas, Europe, Africa and the East. We then pulled very simple annual closing price data (not reinvesting dividends of doing anything fancy, just the raw data) to draw up some stats and came to interesting conclusions.

These are the markets

  1. North – European UK FTSE 100
  2. East – South African JSE Top 40
  3. South – Japanese Nikkei 225
  4. West – American S&P500

The 20 year stats (ending 31.12.2015)

United States S&P United Kingdom FTSE South Africa JSE Japan Nikkei Average
Max  32%  23%  76%  54% 46%
Min  -38%  -31%  -26%  -42% -34%
Avg  8.0%  2.3%  13.2%  2.3% 6.5%
Annual  6.2%  2.1%  11.3%  -0.1% 4.9%
Yrs.up  14  12  15  10 12.75
Yrs.dn  5  7  5  9 6.5
Ratio 2.8:1 1.7:1 3:1 1.1:1 2:1
Best 2013 2009 1999 2013 Varies
Worst 2008 2008 2008 2008 2008

Some conclusions

Nikkei had the worst overall performance, being the most volatile (biggest swings) and ended down over the 20 year period (even just so). Our local hero the JSE had the lowest down year and the biggest up year, plus the highest average and annual returns. To give you an indication of how often the markets turned pear-shaped, look at the S&P & JSE with the most number of up years for every down year, at 3-to-1, meaning over a 20 year history both these indices have been up for ~15 yrs and down for 5. We saved the worst for last – the FTSE & S&P both had a worst year that exceed their best year. When its bad, its really bad.

What does this tell you?

Excluding dividends, the average annual return on the JSE was around 11% per year for this period. This beats the claimed inflation figures for our country, but is probably closer to par with the price increases you experience at the affluent end of the market. Also, the average annualized return for the group sits at 5%, which is what you can earn by leaving your money in a local bank account.

Key

  • Max = highest pct return in a calendar year
  • Min = lowest pct return in a calendar year
  • Avg = average pct return in a calendar year
  • Annual = average annualized return over the 20 yrs
  • Yrs.up = number of years with a positive return
  • Yrs.dn = number of years with a negative return
  • Ratio = for every 1 down year, you will have x up yrs
  • Best in = year with the highest pct return
  • Worst in = year with the lowest pct return
  • Period = the 20 years from 01.01.1996 to 31.12.2015

 

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