A few days ago, the FTSE-100 Index reached an all-time high. Excellent: clear evidence of the long-term returns available from stock market investment.
Except that it only maintained that all-time high for a matter of a few hours, and then sank back below the previous high again.
And rather more troublingly, the previous high had been achieved rather over 14 years ago, back at the very end of the previous century, in December 1999. So, in simple terms, if you have an investment in, say, a FTSE-100 tracker fund which you’ve held for 15 years, its capital value is now slightly less than it was at the outset. Actually, if you take the effect of charges into account, it’s significantly less.
OK, OK, this is a bit misleading. There are at least three reasons why it isn’t quite as bad as I’m saying:
1. You’ll have been earning dividends over these 15 years. If you look at your total return, with dividends reinvested, you’ll be up by, I don’t know, quite a lot.
2. Although the index hasn’t been above its December 1999 level over the period since, it has fallen a long way below, on more than one occasion. If you’d successfully exploited the index’s volatility – in other words buying at the bottom and selling at the top – you could have made a lot of money despite the overall absence of growth.
3. We’re only talking about the FTSE-100 here. Various other indices – including crappy little ones in crappy little emerging markets, but also rather more grown-up ones like the Dow – have gone up a great deal over the same period.
Still, it’s definitely kind of depressing that the index to which most of us are most heavily exposed has shown absolutely no capital growth over 15 years. I can’t tell you how many times over that period I’ve written copy about the “superior long-term returns you can expect from an investment in stocks and shares.” As I asked rather anxiously in a blog I wrote six or seven years ago, how long does the long term need to be?