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For the last 200 years, the US stock market has produced a 7-8% real annual return, ie a doubling every 10 years. Same is true for the Swedish stock market for the last 100 years,

The interesting thing however, is that there were actually quite few years when you got these 7-8%. Having a 20% increase or a 10% fall was more par the course, and there were periods (such as after the 1929 crash) when it took 25 years or more for the stock market to recover.

What's the lesson here? Well, there are some really basic lessons a lot of people keep forgetting. Like, a share is not something abstract: it is a share in a company. And if said company is a reasonably stable and solid business, it will pay you dividends. The (reinvested) dividends are in general half of the the total returns from the stock market in the last 100 years. So don't ignore those sustainable dividend payers.

With solid dividends you can get a reasonable cash stream from your savings even when the economy falls into the dreaded liquidity trap, and while you wait out that 20 year lull in the stock market. And don't worry: if you die while waiting, your kids can always inherit your shares.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Mar 12th, 2012 at 09:03:28 PM EST
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