See how a dollar would have grown over the past 94 years [pdf]
121 comments
·June 6, 2025fasthands9
ryandrake
Not comparing apples to apples, though. Those government bonds were, by any reasonable measurement, risk free (EDIT: as another commenter noted, not exactly, we could call them "minimal risk"), while "the market" is not.
Looking back in hindsight is always risk-free, though, which can lead to faulty conclusions.
jameslk
On the timescale of 30 years for gov bonds vs diversified US stocks, this is almost meaningless statement. The longer a risky asset is held, the less chance of loss you’ll have. Short-horizon returns are extremely volatile, but that volatility "mean-reverts" over time.
This is especially true for stocks vs bonds. Because the cash flows of bonds are fixed, prolonged inflation or rate spikes can deliver a loss that stays a loss, making long-term "safety" in bonds partly an illusion.
cortesoft
> The longer a risky asset is held, the less chance of loss you’ll have
I understand what you are trying to say here, but it really depends on what the “risky asset” is. If you hold a diversified set of risky assets, like a stock market index fund, then what you say is correct.
However, there are other risky assets that don’t hold to this “a long time horizon reduces risk” statement. For example, if you put all your investment in a single stock, that is a risky asset that does not necessarily revert to the mean over time. Many companies go out of business, and the stock goes to zero and will never recover no matter how long you wait.
It is important to note what kind of risk you are taking.
ryandrake
> On the timescale of 30 years for gov bonds vs diversified US stocks, this is almost meaningless statement. The longer a risky asset is held, the less chance of loss you’ll have. Short-horizon returns are extremely volatile, but that volatility "mean-reverts" over time.
This is only true if you look back 30 years. What will happen in the next 30 years? Do you know for sure?
scubazealous
Bonds are considered safer because short of the US losing WWIII there is practically no way the US bonds would not pay out or lose value. US Bonds are safe and predictable, backed up by the immense military and resources of the nation.
Investing in Apple 30 years ago would net a much higher return on $5k but even Apple was considered a unsafe investment in the 90s. On the other hand, Enron was considered a safe investment by many but went bankrupt almost overnight and shares became practically worthless.
floundy
The Nikkei 225 is still below its peak value from December of 1989. The US is an outlier in terms of historical average stock market returns and there is no guarantee this outperformance will continue into the future. Actually I'd say it's less likely, given that should it continue, the US market cap will eat the entire world stock market. The US stock market is currently 62% of the world's stock market capitalization.
taeric
I mean... the risk of risky assets is that they won't last that long. Any asset you can look back on having held for a long time, is by definition less risky than you could have been. No?
BlandDuck
Exactly, if it had been obvious at the time that "the market" would deliver a better return, for certain, then nobody would have bought bonds at those prices.
Then bond prices would have declined (and their expected returns or interest rate would have increased) until, in equilibrium, the anticipation was that the stocks and bonds would deliver comparable expected risk-adjusted returns.
JackFr
Very few entities have a 98 year horizon. People sure don't. Some insurance companies do I suppose.
A more interesting graph would be to show me the 30 year return at each point along the way. My gues is that stocks would still mostly come out on top, but not the runaway you see here.
tjwebbnorfolk
"Risk-free" is a popular shorthand for "The US government won't default". But default is far from the only risk inherent in bond ownership.
Risk is the chance something bad happens to you.
Held for 30 years, bonds are eaten alive by inflation. That's a bad thing that happens to you if you hold bonds for a long time.
kgwgk
> Held for 30 years, bonds are eaten alive by inflation.
20-year and 30-year bonds yield 5% today. That's well above inflation expectations.
You can actually buy inflation-linked bonds that are going to pay you 2.5% over inflation for the next 20 or 30 years - whatever happens with inflation.
ty6853
Indeed. There's always the story of finding stacks of bills in the wall of granddaddies house despite the fact creditors and the bank were up his ass to the bitter end for medical bills.
Given the ever increasing number of people bankrupted by medical bills, divorce, child support, lawsuits, etc we're quickly moving into a world where it might be foolish to expect assets accessible to a brokerage or bank will still be there by the time you need them.
toasterlovin
I'm not sure that a US government bond has a meaningfully different risk profile than an aggregate investment in US equity markets.
ryandrake
If this were really true, they would offer similar returns.
marsten
A surprising number of 401(k) plans default to a money market fund for invested assets. Imagine retiring after a decades-long career and realizing what could have been.
cced
> Imagine retiring after a decades-long career and realizing what could have been.
I'm not following what this means. Can you please elaborate?
jlmcguire
I believe they mean realizing that if you had invested into stocks instead of money market you'd have likely realized a quite large return. Money markets seek to keep your returns to around inflation.
kgwgk
If they bought 30-year bonds, yielding 8%-9% per year, you may have received only the 5k in the end but what happened with the 13k in coupons?
kgwgk
Also, if you had been born in 2000 you may have preferred the bonds. It took 20 years for equities to outperform.
NoboruWataya
I believe the first broadly diversified ETF didn't come about until a few years later, so realistically there wasn't an easy way for a retail investor to invest 5k in "the market" back then.
(EDIT: Not true, see below.)
sokoloff
Vanguard launched an S&P 500 fund for retail investors in 1976.
NoboruWataya
I stand corrected! I was just thinking about SPY and its ilk.
fasthands9
That's very fair. Index funds are conventional wisdom now, but I do suspect there was a long time where they were undervalued because fees were high. Now, everyone is encouraged to invest in them and do think the conventional wisdom in 30 years could possibly swing back to real estate or something like "index funds of tech"
kgwgk
> Index funds [...] fees were high
According to https://corporate.vanguard.com/content/corporatesite/us/en/c... they were 0.35% in 1990. Higher than now, but hardly "high".
Of course there are other fees involved and everything was more complex and more expensive.
nosianu
> but when I did the math to see how much more it would have been
I have a suggestion for all the many similar problems around probability: Reframe it to be more correct.
Instead of looking against the arrow of time, backwards with full knowledge ask yourself the corresponding question looking forward, from where you are right now.
And then remember that that was the position you were in back then.
Questions that deal directly or indirectly with probabilities become confusing, and frankly stupid, when you violate the arrow of time and make "backward predictions". One should just not ask that question, not even for fun. They not only make no sense, our psyche suffers when we try, even if just a little.
This is part of another kind of problems: Asking why a given answer is wrong, for example in multiple choice questions. One of the best courses I took was an audio cassette pilot license theory course. One thing the speaker said about the multiple choice part of the exam was this. DO NOT (with a lot of emphasis and repetition in the audio) try to dwell on why a point is wrong. Concentrate on the true statements alone. Reason was similar to why raising the question why person XYS is NOT a pedophile still creates the association in the brains of people exposed to statements like that repeatedly. Apart from that, the number of potential wrong statements exceeds the valid ones by many orders of magnitude.
Similarly, just do not think about problems that deal with probabilities and predictions looking backward. It's just not a valid way to think about them. If you must, reformulate to make them forward-looking.
The problem of words and thoughts is the universe checks their validity only very rarely directly and immediately. If we don't restrain ourselves, our thoughts end up not representing reality more and more. Thinking requires quite a bit of self-discipline, we have to place the missing rails ourselves.
trod1234
This isn't useful or correct, and ends up being a bit circular getting into the weeds.
The focus should be that the normal math formula for bond valuation doesn't account for yearly real or projected inflation.
Almost everyone I have met doesn't know how to modify the standard formula correctly unless they've already done it at some point in the past. Its not a trivial exercise.
You have to understand the formulas well enough to modify them to account for the loss in purchasing power that compounds yearly, as a difference between the interest rate and real inflation over the bond terms.
Most years, inflation has been well above that 2% margin dramatically impacting the rate of return or real yield.
nosianu
> This isn't useful or correct
The formulas do not help you at all with the knowing. or not knowing, with being able to "predict" the past vs. being able to predict the future! They make assumptions.
I would make the claim my statement is useful for what I said, which was for somebody looking back at a decision of the long ago past with hindsight knowledge.
The post was not about somebody evaluating different investments either.
Oh and thanks, I guess, for completely disregarding that my comment was much more generalized? You threw away the vast majority of it.
rufus_foreman
>> It was a very nice treat, but when I did the math to see how much more it would have been if just invested in the market I gasped.
This is known as "looking a gift horse in the mouth".
trod1234
The problem is that most people don't know how to invest, and this has been done by purposeful intent. Financial education was removed from centralized education long ago.
Bonds necessarily need to exceed the yearly inflation to retain their purchasing power. People claim these are risk free, but they aren't, even when held to maturity. You lose money from the inflation when the rate of interest is below the inflation rate which it almost surely was given the several decades of almost zero low-interest rates in that time period.
There are some general rules that anyone should know. Rule #1 is don't lose your principal investment (don't lose money). Rule #2 is don't invest in a casino, always manage your risk, and know when its unmanageable. Rule #3 invest in yourself, understand the business, limit debt, and focus on value.
People today don't realize the market has been rigged through a number of convoluted ways into that of a casino.
Price discovery is gone because most transactions happen off exchange in the dark. In 2024, over 50% of transactions occurred off-exchange in dark pools. You then also have payment for order flow, synthetic shares via options through predatory middlemen, and no real law enforcement mechanism for when those big players break the rules; and they do on the regular as they did in GME/FRC, and too many other places to count. You've also got large banks pumping the prices up through non-fractional reserve based debt backing options contracts which they use to yield farm, and profits funneled away from businesses into stock buybacks hollowing them out of any value.
No visibility, no price discovery, no economic calculation. These things fail when about 1/4 of the market is off-exchange, its been at crisis for a long time.
There is no real opportunity for investment when you allow those rules to be broken. Its not an actual investment.
jihadjihad
Rule of 72: time for an investment to double is roughly 72 / the interest rate [0].
Annual return on small-cap stocks: ~12%
Time to double: 72/12 ~= 6 years
Number of doubling periods: 99/6 ~= 16
Final investment value: ~2**16 ~= $65k ~= $64,417
marsten
I've always found it amusing that mathematically it should be the rule of 70, but it's commonly rounded to 72 because the latter has more convenient divisors.
70 is divisible by 1, 2, 5, 7, 10, 14, 35, 70
72 is divisible by 1, 2, 3, 4, 6, 8, 9, 12, 18, 24, 36, 72
MarkusQ
It's also because in the interest rate range we're normally dealing with (5%-10% APR) the approximation of 1+x/100 as 1.01^x in the derivation of the rule is off a bit, and something like 1.0097^x works somewhat better. ln(2)/ln(1.0097) is about 71.8, thus the use of 72 and it's convenient divisors.
trod1234
Interesting, thanks for sharing this.
Balgair
Oh gosh, 72 is way more anti-prime, I've always just used the rule of 70 in my head though.
if I have a calculator handy, I'll use [(69.3/rate) + 0.3] as that's really close to the actual numbers for rates under about 10 or so.
I'm curious as to what other methods people use.
Honestly, I should probably just memorize the 12 or so numbers.
For those interested, here's a mnemonic that I cooked up quick with chatGPT:
70 bears ate 35 lions who ate 23 tigers who ate 18 wolves who ate 14 dogs who ate 12 cats who quickly ate 10, 9, 8, 7 mice who ate 6.6 grasshoppers who ate 6.1 barleycorns
Look, I know this is not the best, but hey, it's Friday. Please help me out and make up a better one.
70, 35, 23, 18, 14, 12, 10, 9, 8, 7, 6.6, 6.1
Kon-Peki
Here is essentially the same chart but with 10x more information. Unlike the original chart, it also shows stock returns without dividend reinvestment. And that isn’t pretty :)
https://www.crsp.org/wp-content/uploads/CRSP_Investments_Ill...
maltyr
Perfect time to revisit the Futurama episode where Fry realizes he's rich. https://www.youtube.com/watch?v=6JwkaLt9pf8
fuzzythinker
I don't watch Futurama, so I may be wrong in how the story goes. But I think he thought that he's rich but inflation shouldn't be much lower than interest (irl, it's actually way higher), so the 4 billion is likely worth 4 bucks or at most 4 hundred.
recursivecaveat
It seems like the episode treats him as legitimately rich, but you're right: assuming targeted 2% inflation, it's like $10. That's being pretty generous too, 1000 years is a long time to go without some kind of societal shakeup event where people stop honoring 800 year old numbers on a screen as legitimately valuable. It's not like there is any entity today who would feel obligated to give you $4 billion dollars for your 11th century banknote.
d_burfoot
Note that the government has huge incentives to downplay the inflation rate. Over the time period of the graph, the price of gold went up by about 100x; I would consider that a more accurate estimate of inflation than the 18x number implied by the chart. Due to the way exponentials work, you can hide a lot of inflation over 100 years by claiming the annual rate is just half a percent lower than it really is.
lesuorac
Gold is up ~40% over the past year. Are you really going to claim inflation is up 40% over that time period?
I think Gold is too susceptible to price fluctuations from speculators and that you should use Copper or something that people don't hoard to re-sell.
verteu
For reference, CAGR from 1926 to today:
Milk: 2.5% (*low-quality data)
CPI: 2.9%
Copper: 3.4%
Gold: 5.2%
baron816
Statistics like CPI really aren’t meant to be used to track inflation over many decades. It’s really only meaningful over a handful of years, and only when we’re talking about the economy as a whole (not to use it to say any individual or group is better or worse off). A dollar today can buy many things it could not buy 100 years ago.
The price of gold is a completely useless measure of inflation. Governments have a long history of manipulating its price as a policy goal. Even today, governments buy and hold large quantities of gold.
Lerc
It would be worth seeing the price of a loaf of bread, a dozen eggs, and a bottle of milk.
While not capturing the complexities of modern technology, they are available across the entire period and probably have a closer relationship to people's lives than the price of gold.
throw0101c
> Note that the government has huge incentives to downplay the inflation rate. Over the time period of the graph, the price of gold went up by about 100x; I would consider that a more accurate estimate of inflation than the 18x number implied by the chart.
The CPI is one of the most studied and examined statistics that the government releases. Everyone from hyper-capitalist financial traders to leftist unions folks (because of CoL contract provisions) examine in and none of these folks who have a vested interested in calling out fraud have stepped forward.
There have been numerous peer-reviewed examinations about it, including open source code:
* https://en.wikipedia.org/wiki/MIT_Billion_Prices_project
There are disagreements about the "best" way to measure certain things (e.g., owner-occupied housing), but for the published methodology there is no cooking of the books that anyone without a tinfoil hat can find.
A recent profile of how the BLS does things:
* https://www.washingtonpost.com/opinions/interactive/2024/joh...
* http://archive.is/https://www.washingtonpost.com/opinions/in...
(Included as a chapter in the recent Michael Lewis (of Big Short fame) book Who Is The Government?)
And regarding gold specifically, there have been periods (that stretch over decade(s)) where gold has been flat, especially in inflation-adjust terms:
* https://graphics.thomsonreuters.com/11/07/CMD_GLDNFLT0711_VF...
The fact that it just happened to pop up over the last 2-3 years is recently bias. Your returns would have been highly dependent on when you got in for each (use slider):
* https://www.macrotrends.net/2608/gold-price-vs-stock-market-...
dedicate
This isn't a chart of returns; it's a chart of who had nerves of absolute steel. Be honest, who here has actually lived through a major dip and not been tempted to smash that "sell" button?
PopAlongKid
>Be honest, who here has actually lived through a major dip and not been tempted to smash that "sell" button?
Honestly, I've lived through four (1987[0], dot-com, 2008 recession, 2020 coronavirus) and was not tempted. For the first two, I was much too far away from retirement to worry about it, and for the third, I was still over ten years away from even beginning to think about retirement distributions, and because of my experience with the first two, again was not tempted. The fact that my investments for much of that time were in pre-tax accounts helped me avoid feeling some pain as well.
Nowadays, I try to keep, in addition to an emergency fund, about a year's worth of retirement distributions in money market equivalents, even inside my IRA.
[0]My employer started a 401k plan prior to 1987
null
rufus_foreman
I don't get tempted to smash the sell button during major dips, I get tempted to smash the buy button. The only time I smashed the sell button was during the stock market bubble in 1999.
I wanted to buy during this year's dip but I took a look at my asset allocation and I was still way overweight in US stocks compared to my target so I couldn't justify it. Hopefully people freak out even more next time.
Stock market crashes are my happy place.
trod1234
I think the same could be said of anyone who has successfully traded regularly over several years.
To do that kind of business you have to have mastered yourself or set up systems where the emotional rollercoaster ride doesn't change your choices.
> I wanted to buy during this year's dip...
The Stock market hasn't had a real crash in quite a long time as evidenced by a number of things including the PE values and stock buybacks, lack of general price discoverability towards chaotic whipsaws and the indexes topping all time highs.
People are going to lose the shirts off their backs when it does come, and it will come suddenly without warning. Best to keep that in mind when greed might try to lead you astray. Greed is both a friend and a trader's worst enemy.
Printing money enrolls participants in boom bust cycles. We've had a boom for the last 10+ years nearly straight. The stock market is way overdue for a crash. Its an avalanche prone area with a massive snowpack built up. There's always some chaotic trigger that gets everything moving again.
ty6853
If we're allowed to cherry pick years, now do gold
throw0101c
Heres a site with a slider where you can pick arbitrary start and end times:
* https://www.macrotrends.net/2608/gold-price-vs-stock-market-...
onlyrealcuzzo
The cool thing about about something with a consistently high return and a long-horizon (going back 100 years) - you're still getting a high return.
It's about ~6% CAGR vs ~8% if you picked the absolute best vs absolute worst time around the Great Depression.
If you include re-investing dividends, it's about ~8% vs ~10%. You're not getting anywhere near that with gold over any sufficiently long non-cherry picked time horizon.
The even better thing about the S&P is it has relatively low volatility. You're really unlikely to put all your eggs in the S&P at the absolute worst timing. Sure, it's possible. Not likely.
dachris
It's a nice graph, I think the most well known one is in "Stocks for the long run" [0]
I'm more concerned how it will grow over the next n (lets say 50) years.
Somehow, it doesn't really fit into my head that there will be another 7 doublings of money invested stock market over the coming 50 years (as others have commented, 10% annually is doubling every 7 years).
Reality is complex of course, there's inflation, there's taxes, dividends don't grow the stock market cap.
Still, I would assume less growth due to several factors. The last few decades have seen several tailwinds that can't repeat in the same way:
- falling corporate tax rates globally [1]
- falling interest rates [2] (since 1980, until 2020)
- rising P/E ratios (partly in response to falling interest rates) [3]
- demographic expansion [4]
- improvements in diversification (index funds, theoretically you need a lower risk premium than when investing in individual stocks)
And I'm not sure that headwinds coming from environmental degradation of many types are already priced in.
I still think that stocks will do better than bonds (there's a risk premium [5], those are real assets, there's innovation and growth), just be cautious about assuming that the future will mirror the past.
[0] https://en.wikipedia.org/wiki/Stocks_for_the_Long_Run
[1] https://taxfoundation.org/data/all/global/corporate-tax-rate...
[2] https://fred.stlouisfed.org/series/DGS10 (choose max in the time scale)
[3] https://www.multpl.com/s-p-500-pe-ratio
[4] https://en.wikipedia.org/wiki/World_population
[5] https://pages.stern.nyu.edu/~adamodar/ ERP currently at about 4.4%
grobbyy
It's also worth noting that's US stocks. The story in Europe or Argentina would be completely different, and there was no way to figure that out in 1920.
nly
So many people's future retirement prosperity is now so tied to the performance of stocks that we better hope it continues.
actinium226
Astute observers will note that the $1 in stocks gets margin called shortly after the initial investment in the late 20's and so in a sense the return over 100 years is 0.
ashdksnndck
The title doesn’t mention owning stock on margin.
mjburgess
But nor does it include owning stocks in companies that go out of business, or indeed, nations.
throw0101c
> But nor does it include owning stocks in companies that go out of business, or indeed, nations.
Which is why you invest in the entire market, internationally diversified. There are now funds (mutual/ETF) that allow you to do this with a single purchase:
ashdksnndck
I think that’s generally included when you compute total return of an index. For example, Enron should be part of the drop shown in 2001.
floundy
Incorrect, the DJIA lost around 90% of its index value in the Great Depression, so the theoretical portfolio in this exercise would have declined to around 10 cents, but holding an asset at a negative return does not result in a margin call if one is not trading with leverage.
In practice, it would have been a toss-up between individuals' outcomes because index funds as we are familiar with them today did not exist at the time. The DJIA was a price index but there was no way to invest in the DJIA basket as there is today, so brokers picked stocks on behalf of investors. So it's certain that some investors' portfolios did decline to zero during this time due to bankruptcies of all the companies they happened to be holding.
tiahura
The small cap edge is surprising.
_vaporwave_
I thought the same initially but this may just be a case of recency bias. Small caps have underperformed large cap stocks for the last ~12 years but these things tend to go in cycles: https://blogs.cfainstitute.org/investor/2025/04/24/small-cap....
It will be interesting to see how the next cycle plays out with the recent concentration of returns in large cap tech stocks (Magnificent 7).
ArtTimeInvestor
Looks like that was a one-time event in the 70s. The rest of the time, the small stocks line goes roughly parallel to the large stocks line.
rokobobo
Right--in log scale, the gap has stayed roughly the same until around 1980.
BlandDuck
In finance there is an ongoing discussion of whether the small-cap premium still exists. For technical discussions, look for the terms "SMB size factor".
default-kramer
And it's not obvious thanks to the logarithmic scale... There must have been a better way to present this information.
ortusdux
Reminds me of the iPod color I bought in 2004, that, had I bought stock instead, would be worth ~$225k.
scotty79
You could have still sell it used and buy Bitcoin in 2010 and earn even more. But who knew.
moralestapia
Classic meme.
I wish I had invested $1,000 back in 1926 but I was busy in a non-material state in the hyper-realm.
null
When I was born in 1990 my grandparents spent like 5k on government bonds that my dad didn't tell me about until I was 30.
It was a very nice treat, but when I did the math to see how much more it would have been if just invested in the market I gasped.