Wednesday, 29 October 2008

Exploding the myths on shares

The Times business section is on top form this morning in spotting trends that matter. In addition to Suzy Jagger's analysis of the latest US data Patrick Hosking demolishes the myth about the good performance of returns on shares:
'British shares are lower today than 12 years ago. Japanese shares are lower than 26 years ago.
'Tim Bond, the man behind Barclays' Equity-Gilt study, has crunched up-to-date numbers for The Times and come up with some sobering findings. Only investors who put their money to work in 1983 or earlier would have done better placing it in equities than government bonds (gilts). From 1984 onwards, in any timeframe up to the present day, gilts have produced a better total return than shares. Over any timeframe of less than 15 years to the present day, even deposit accounts have produced a better return.
'The hefty premium that supposedly rewards investors prepared to take the extra risk of investing in shares has not paid off for anyone with a time horizon of less than 25 years. In short, capitalism has not been working terribly well of late.'
Read Patrick Hoskin's full analysis here.

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