This year has been depressing for investors, so Barclays’ latest Equity Gilt Study is a refreshing reminder that stocks really are a good long-term bet.
In the UK, stocks have outperformed cash in 84 of the last 121 years, or 69 per cent of the time. That percentage rises as you extend your holding period, with equities winning in 91 per cent of 10-year periods.
If you really want to bag decent long-term returns, however, you must reinvest your dividends and let compound interest work its magic.
In the UK, a £100 investment at the end of 1945 would have grown to £275,852 if you reinvested dividend income. If you didn’t, that figure falls all the way down to £10,897.
These are nominal figures. Adjusted for inflation, that £100 investment is worth £6,370 after reinvesting dividends, compared to just £252 if you didn’t. The “stocks for the long run” argument rests on reinvesting your profits, not spending them.
