The Stock Market Has A Great Return Over 100 Years

Owning stocks in the stock market has returned more to investors than most other investments.  On average, the stock market has grown 8% year by year.

But what does that mean to you?

Well, it means that if you invested $10,000, then nine years later it would be worth $20,000.  Your investment would have doubled in nine years.  So that is $10,000 in free money that you didn’t have to work for.  The money just grew on its own while you were living your life, day by day.

Now that 8% number I just used is a general guideline.  And it’s a pretty good guideline.  However, it varies depending on what types of stocks and time frame you choose.  For example, by one measure, over the last 87 years, stocks in large companies have averaged a whopping 11.8 percent a year.

Other common measures indicate the overall stock market has increased from 7 – 10% a year.  And yet another measure states it has returned on average 8% per year.

By taking all of these historical measures into consideration, I tend to use 8% a year as a general guide.  So let’s go with that.  And here is a chart that shows the overall trend of the market since before 1920.

Now compare that to the average savings account, which pays you a measly 0.06 percent.  Or worse yet, some of the nation’s biggest banks pay rates even lower, as low as 0.01%.

Put another way, investment in stocks, using our 8% guideline, could DOUBLE YOUR MONEY in 9 years.  But using the .01 interest on savings from the big banks it would take 7,200 years to double your money.

That’s a huge difference in speed to create wealth.  So now do you understand why the wealthy own businesses and stocks?  That’s a pretty compelling reason to be invested in the stock market, wouldn’t you say?  Clearly the wealthy understand this difference.  And now you do too.

Okay – so I used two extreme investments for comparison.  There are also government Treasury bonds you could invest in, which have averaged 3.6 percent.  But it would still take 20 years to double your money.  And try getting that return today, when they are actually much lower.

And while we’re at it, let’s do one more comparison in the stock market.  Let’s look at the return over the past 87 years for small companies.  It’s a whopping 16.5 percent.  Or put another way, you would double your money in 4.4 years.

Now remember, these are just averages.  As the chart shows, stocks may go up more in some years, and they will lose money in others.  But over time, with good stocks, it’s clear how the wealthy grow their wealth more quickly than the average person.

It’s because they are invested in stocks and businesses that grow their wealth mush faster than those who are not invested.  They are being smarter with their money.

To learn how to buy your first stock and be smarter with your money, like the wealthy do, you might want to check out my latest book entitled Stock Investing For Beginners.  You can browse through it for free right here.

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