Wednesday, May 26, 2010

The Best & Worst 35-Year Returns in Stock Market History

35-Year Rolling Returns

Previously I have published graphs of 5, 10, 20 and 50-year rolling returns. Thirty-five years may seem like a strange choice for an addition to the series. However, I chose 35 years because I thought the results might provide useful benchmarks for those planning for, for example, ages 30-65, 65-100, etc. As always, because we are looking at rolling returns, we will look at not only the best and worst 35-year returns, but at all 35-year returns.

Stock Market Rolling 35-Year Returns Graph

Stock market (Dow) rolling 35-year returns
Dow 35-Year Rolling Returns

Above is a chart of the 35-year total return of the DJIA (Dow Jones Industrial Average) beginning around 1900. Each point on the graph represents the average annual return earned by an investor who bought the Dow at that year-end and sold 35 years later, reinvesting dividends in the interim. For example, the first point on the graph shows that an investor who bought at year-end 1901, reinvested dividends annually, and sold at year-end 1936 earned 8.7% per year. Note that the returns prior to 1929 are estimated (I have accurate closing prices, but have estimated the dividends based upon another market index).

The Best and Worst 35-Year Returns in Dow Jones History (Since 1900)

The best 35-year periods began in:
  • 1932: the return was about 12.9% per year for the next 35 years
  • 1974: 12.1% annual return
The worst 35-year periods began in:
  • 1906: the return was about 6.1% for the next 35 years
  • 1905: 6.4% annual return


Not surprisingly, the best returns were earned by investors who had the fortitude to invest in the depths of a bear market, in 1932 and 1974.

The average 35-year return was 9.7% -- slightly less than the average 10 and 20-year returns. In addition, this graph is the only one of the series where returns don't appear to be clearly cyclical; in all of the others, returns cycle between low return periods and high return periods.

A more intriguing finding is the upward slope of the returns. Virtually all of the sub 8% returns are pre-1914, when lower returns seem to be the norm. From roughly 1920-1960 returns appear to cluster around 10% -- sometimes higher, sometimes lower. However, from that point on every single 35-year period sports a double-digit annual return; the vast majority of the greater than 11% returns come from this period. Thirty-five year periods beginning in 1960 and later have the advantage of ending in the years beginning 1995 -- for the most part a period of market euphoria. I think that explains the elevated returns toward the end. I expect those to abate as additional 35-year periods are completed.

Related Posts

The Best & Worst 10-Year Returns in Stock Market History
The Best & Worst 20-Year Returns
The Best & Worst 5 & 50 Year Returns
Rolling Returns vs P/E Ratio
Range of Returns for 1-100 Year Holding Periods
Range of Results in Dollars for 10-100 Years
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This work is licensed under a Creative Commons Attribution 3.0 unported license. Last modified: 10/8/10

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