From the historical rate of return for the stock market, it has come out that over longer durations, Treasury bills and bonds tend to appreciate in value. The same is also true for corporate bonds. Usually, if one takes two consecutive years, it has been seen that the returns are higher in the second year compared to the first year. If you take a 15-year period to check the historical rate of return for the stock market, you will realize that on an average the return is around 6.3 percent. This is under the supposition that an investor invests around $1,000 in companies listed by Standard and Poor's for the same time period, and the dividends reaped from those investments are re-invested into the stocks. Usually the stock market is very volatile and it faces up and down movements on a daily basis. Also, the normal maxim for investing in the stock market is to opt for long term investment as the investor will be assured of a high return. However, this is not always true when taken in the context of historical rate of return for the stock market. It has been seen that for certain years, the stocks have performed so badly that over a period of three years, their value had decreased by nearly half.
Therefore, when investing in the stock market, an investor should take into account the historical rate of return, but it should not become the sole criterion for investing in a particular stock.
More Articles :
|
