Stock market charts you never saw (2021)

> Investors have seen countless charts of US stock market performance which start in 1926 and end near the present. But US trading long predates 1926, and the foreshortened perspective that results from a focus on post-1926 data can be misleading.

> The goal is to challenge shibboleths about the expected outcomes of buy-and-hold stock market investing, and to raise questions about the expected performance of stocks versus bonds over long periods.

> Put another way, since 1928 dividends plus inflation accounted for 99.7% of the nominal wealth produced, as of 2008, by investing in stocks.

> Total return measured on the century scale presumes an investor who never needs to spend the dividends or interest received. No real investor, individual or institution, has that luxury. And there is one class of individual investor, now of growing importance within the financial planning literature as the Baby Boom generation ages, for whom the total return metric is particularly malaprop: retirees. Once portfolio accumulation ceases with retirement, portfolio income must be spent to live. Under those circumstances real price return, over short periods lasting two or three decades, becomes an important metric. By that measure, an investment in stocks has been dicey indeed.

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Just to whet your appetite some more:

> Figure 4 [1] illuminates how much of the long-term return on stocks since 1926 has been due to sustained high inflation on the one hand, and to the favorable enhancement from re-investing dividends on the other. Under the one depiction, the portfolio returned about 9% compounded, from near the high in the Twenties to near the low in the Oughts; under the other, only about 1.5%.

> Few contemporary investors expect a multi-decade return on their stock portfolios of 1 2% per year. They have no reason to expect such poor results, because most investors have never seen a post-1926 chart of inflation-adjusted, price-only returns, and have rarely seen any charts extending back past 1896.

[1] https://imgur.com/a/QCtugvC

Just to make sure I am following correctly, is this referring to the process which:

corporations have had their costs go up roughly 2% per year since 1928, so they have raised their prices roughly 2% per year, making it so that cost increases (labor/good/services/whatever) are "passthroughs" (assuming margins stay the same), passing along increases to customers (who have roughly had their pay increase 2% per year)

and because of this, corporations have stayed profitable (more profitable in dollars, "the same" profitable in percentage given margins/inflation?), and share prices have grown?

Why should I care about price-only returns?

Had I put it into some fancy ETF (Recall Vanguard dates back only to 1975, but whatever) I'd be a billionaire.

That's it, that is the entire difference of less than an order of magnitude. Don't reckon the nickels and the dimes matter much to centenarians.

Most people don't even have $8000 to invest so they plow it all into crypto and beanie babies and we scoff at them trying to x10. Food for thought. Memento Mori.

Edit for clarity: I obviously didn't mean stash cash under the mattress. Sorry for the confusion.