January 20


Does History Repeat Itself?

Hello again!  It is time for this week’s installment of David Kennon’s Retirement Reality Check.

As an aside, having a dog is not cheap.   Our beloved new puppy, Odie, has already been to the vet three times with bills totaling over $1000.  So far he has sprained his ankle, had gum surgery on his mouth, and developed “cherry eye”- which is like a permanent eye infection.     How can something that weighs 10 pounds be so expensive?!

This week we are going to talk distant history.  We are going waaaaaay back.

Warning:  What I am about to share with you is not my opinion.  What I am about to share with you is simply data.  Facts.

I often talk about how, in the past 100 years, the stock and bond markets have shown remarkable consistency.  The patterns they exhibit are so clear that it’s impossible to ignore.

But let’s dig deeper.  Maybe this past century was an anomaly.  What about the 1800’s?

That’s right, we are going back to the days of the Louisiana Purchase and the Civil war.

In past articles I have spoken at great length about how stocks had returned an average of 10% during the 20th century, but what about the 19th century?

Now remember, the lightbulb wasn’t invented until 1879, and the leading cause of death in 1900 was tuberculosis.

So, how did the stock market hold up?  We have good data from Dr. Jeremy Siegel who wrote the fantastic book, Stocks for the Long Run.

His data shows that from 1801-1900 the stock market returned an average of 6.51%.

At first glance that appears to be a little disappointing, especially considering that from 1901-2000 the stock market returned an average of 9.89%.

But all is not as straight-forward as it seems.  You see, in the 1800’s the country saw very little inflation.  In fact, something that cost $1 in the year 1800, cost a little less than a dollar one-hundred years later in 1900.

That means that after inflation, stocks from 1800-1900 returned 6.76%.  And from 1900-2000, after inflation, the stock market returned a real return of 6.45%.   You need to subtract out inflation from stock returns to get the real return- the amount of purchasing power your money has grown after inflation.


1. The stock market, after inflation, has had a similar average return for over 200 YEARS.

2.  Going forward, while no one can guarantee what will happen, don’t you want to base your financial decisions on an incredibly consistent pattern that has persisted for centuries?

3.  If you invest in a diversified portfolio of stocks and bonds you are giving yourself the best chance, statistically, to succeed. Investments such as gold, commodities, certificates of deposit, and currencies can have wild and inconsistent returns.  Don’t make this more complicated than it is!

Be Blessed,


The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings.

The value of fixed-income securities may be affected by changing interest rates and changes in credit ratings of the securities.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Indexes are unmanaged portfolios and individuals cannot invest directly in an index.  Actual results will vary.

This communication is for informational purposes only and nothing herein should be construed as a solicitation, recommendation or an offer to buy or sell any securities or product, and does not constitute legal or tax advice. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel.

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