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Long term investment

Through my experience, I noticed that most of the time during the first meeting with an individual investor the main question is : "what will be my return on investment ?"

Like I showed it in the previous investment tips, the return on your investment will depend on different factors like the period of investment (time), the asset allocation, your investment risk tolerance etc.

In the following chart, regularly update by IbbotsonAssociates (with Morningstar) you'll see how 1 USD invested in different asset classes in the US have been performing since 1926 in comparison with the inflation.


  • The best performing investment is also the most volatile (Small Stocks)

  • In the long run, stocks will outperform bonds

  • All asset classes beat the inflation (grey line) over time

  • There will always be an asset class that is underperforming the rest of the market in a short period of time.

  • It's important to diversify your portfolio even in bonds because you can face bad years.

  • Include a portion of good quality bonds reduces risk because bonds reduce the overall volatility of your portfolio

  • More you can save now, better will be the chance for you to reach your financial goals in the future.

Sources :

*Small stocks in this example are represented by the fifth capitalization quintile of stocks on the NYSE for 1926–2011 and the performance of the Dimensional Fund Advisors, Inc. (DFA) U.S. Micro Cap Portfolio thereafter. Large stocks are represented by the Standard & Poor’s 500®, which is an unmanaged group of securities and considered to be representative of the stock market in general. Government bonds are represented by the 20-year U.S. government bond, Treasury bills by the 30-day U.S. Treasury bill, and inflation by the Consumer Price Index. Underlying data is from the Stocks, Bonds, Bills, and Inflation® (SBBI®) Yearbook, by Roger G. Ibbotson and Rex Sinquefield, updated annually. An investment cannot be made directly in an index.

#Ibbotson #Morningstar #Investments #personalfinance #stocks #SP500 #privatebanking #bonds #bills #inflation

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