My end-of-year email from Vanguard noted that the S&P 500 index had a total return (dividends plus price changes) of about 2 percent. This money market-like return confirms my friend Tom’s hypothesis that investors should expect roughly the same return from any asset class. Bonds, stocks, cash, whatever. There will be volatility but you won’t get any risk premium. The consumer price index was up about 3.4 percent Nov 2010-November 2011 (source), so in real terms an investor in U.S. stocks lost about 1.4 percent.
[Foreign stocks did even worse, according to this article. Developed markets lost 12 percent; emerging markets were down 18.6 percent (these numbers may be only for price changes, so with dividends the picture would be slightly brighter).]
From today’s WSJ:
“The Dow Jones Industrial Average ended the year up nearly 6%—a modest rise that belied the turmoil of the last half of the year, when the blue-chip index averaged a daily intraday swing of 270 points between August and November, more than twice as wide than the same period in 2010. And for all the white-knuckle rides, the Standard & Poor’s 500-stock index ended almost right back where it started, finishing down 0.003%.”
Gold didn’t do so bad…
Phil,
the Permanent Portfolio, which I think has come up in conversation here in the past, returned over 11% in 2011.
http://crawlingroad.com/blog/2012/01/01/permanent-portfolio-2011-results/