Interesting Articles

Possible Futures and Keeping Faith With Stocks

Possible Futures and Keeping Faith With Stocks

Two articles, kindly supplied through Credit Suisse, emphasise the returns that equities, bonds and cash have offered over the last 108 years! 

Possible Futures and Keeping Faith With Stocks

With so much uncertainty and a gradual change in the economic order, it is always tempting to run up the flag of an original idea, without testing the view against a long sweep of time. This material, which contains some very concentrated data, depicted in charts, will probably surprise you. It may also steady your views should you be in a state of high emotion.

Remember over the long-term the principal drivers of your return from equities are the following:

  • The initial dividend yield.
  • The real growth of the dividend.
  • The effect of inflation.
  • The changes in the value placed on that income stream.

In the hurly burly of the markets, where capital values can move dramatically in a very short time, we like to believe that most of our gains come from capital appreciation. Empirically, this has been so…but by only a tiny margin. In fact the running dividend yield has typically been responsible for just shy of half of the long-term return from shares.

Read Possible futures and Keeping faith with stocks.

Commentary by Kerr Neilson