
Credit Suisse Global Investment Returns Yearbook 2017 [pdf] - FabHK
https://publications.credit-suisse.com/tasks/render/file/?fileID=B8FDD84D-A4CD-D983-12840F52F61BA0B4
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FabHK
Very insightful long-term study of investment returns, from 1900 to the
present, across 23 countries.

I highlight a few results below that I think might be of interest
(particularly for people that are thinking about investing/retirement).

1\. _Annualised real total return_ (hence, ARTR) for the world from 1900 to
2016 (USD real terms) was 5.1% for equities, 1.8% for bonds.

For US equities, it was 6.4%.

(Note that this includes re-investment of dividends, so this is annualised
real _total_ return. Annualised real _price_ return (capital gains without div
reinvestment) was only 2.1%.)

(Note that the German DAX is a total return index, while most other commonly
quoted indices are price return indices.)

2\. The 1980's and 1990's were a golden age for stocks. The ARTR on the world
equity index was a staggering 10.6%, thus doubling your investment every 7
years (real terms).

3\. The years 2000 to 2016 were much worse for equities. The ARTR on the world
equity index was just 1.9%, doubling your money only after 37 years.

ARTR were negative or zero in Italy, Portugal, Netherlands; 0.8% in Japan,
2.2% in Germany, 2.4% in the UK, and 2.7% in the USA. Better in countries with
commodities: Australia 5.1%, New Zealand 6.4, South Africa 8.2%.

4\. Over 2000–16, bonds were the best asset class in 16 of the 21 countries,
returning ARTR 7.1% in Germany and 5.1% in the USA.

5\. Vol (for 1900 to 2016) has been around 20% p.a. (world 17%, USA 20%, UK
20%, Germany 32% (bloody wars!)).

6\. Equity worst years were down 40%-60% in many countries 2008, 73% to 90% in
the axis countries after WW II.

7\. Inflation 1900 to 2016 was 2.9% p.a. in the USA, 3.7% in the UK, 4.6% in
Germany, 8.1% in Italy. So, over the period, US consumer prices rose by a
factor of 28, UK by a factor of 70 (compounding!)

8\. Bonds over 1900 to 2016: world real returns 1.8%, vol 11%. Negative real
returns for Austria, Italy, Japan, and Germany (even after taking out hyper
inflation in 1922-1923).

9\. "smart beta"/factor investing (momentum, low vol, size = small caps,
income = high yield, value vs growth): They've definitely outperformed in the
past (1926 to 2016, USA), but it's unclear whether the "premium" persists now
or in the future.

My personal conclusions:

1\. Diversify. The "common wisdom" to put everything into equity (growing out
of the 80's and 90's) has something going for it, but as the last decade and a
half showed, is not fool proof. (Note that it makes no sense to move into
bonds now, with the current rates!)

2\. Assuming 6% or even 8% real returns (as some people seem to do) for
retirement planning is optimistic. I think it's prudent to plan with 4% real
return and a 3% withdrawal rate.

If you find further nuggets in the report, please share!

