When I was doing research for my Coca-Cola post, I came by an article written by Muthar Kent, CEO of Coca-Cola. It's somewhat a sales pitch for Coca-Cola, but there are some truths in it that I found interesting. He starts off by talking about the 1970s, when he first started working at Coca-Cola, and I quote:
Kent described well the sentiment of the 70s. This sentiment was either part of the cause or the result of the stock market's performance. In Figure 1, we see the performance of the S&P 500 index in the 1970s. It started off in the 90s and by the end of the decade, had only risen to 110 pts. That is a 22% gain over 10 years, or around 2% growth per year! Wow, that's worse than bond yields!
Then, what happened? The market exploded in the 80s and by the end of that decade, the S&P 500 had risen to 350 pts, a 218% growth in 10 years or 12.2% growth annually. That's more like it! You think you've seen market explosion? Check the 90s! The S&P 500 grew from 350 pts in 1990 to 1400 pts in 2000. If you had invested in an S&P 500 index fund in 1990, you would have had annual returns of 14.8% in the 10 years following!