Eric Nelson, one of our principals at Equius, who examined the “risk premiums” of stocks for two distinct periods going back to 1928. The first period ends in 1990--the ending year for the original Fama/French “Three-Factor” research (The Cross-Section of Expected Stock Returns, The Journal of Finance, June 1992)--and the second period looks at the data from 1991-2009. Here’s what he found:
Will this hold up in the future? Time will tell.....Two “bubbles,” the Internet, real estate, commodities, gold, hedge funds, the “endowment approach,” the re-rebirth of “tactical asset allocation,” Republicans, Democrats, tax cuts, tax increases, no deficits, high deficits, Goldman, Lehman Brothers, etc. all come and go.
Stocks beat bonds, small beats large, and value beats growth. Discipline. Patience. Things you can count on.
Best Regards,
Simba