Unit 2 · Level 4 · Market history
What returns really were
Over roughly 125 years of data (Dimson, Marsh & Staunton), world equities returned about 5% a year AFTER inflation; the US, the era's big winner, closer to 7% real. Government bonds managed roughly 2% real, cash near zero. Two honest footnotes: the US number is partly survivorship bias (you're reading the winner's diary), and none of it is guaranteed to repeat. History gives you a base rate, not a contract.
Free to play. No ads, no token, no account needed to start.
What you get asked
A 'real' return means the return…
Real = nominal minus inflation. It's the only number that measures what your money will actually buy: the League 1 lesson about melting cash, now in reverse.
Match the asset to its rough long-run REAL return (125 years of data)
A few percent of real return doesn't sound heroic, but compounded over decades it's the whole difference between saving and building wealth.
When planning YOUR future, why use the world number (~5% real) rather than the US number (~7%)?
In 1900 you wouldn't have known to bet everything on America; investors then favoured Britain and… Argentina. Plan on the average, be pleasantly surprised by the winner.
Long-run averages hide brutal detours: US stocks spent the entire 2000s, a 'lost ___ ', going roughly nowhere.
Two crashes (2000, 2008) bracketed ten years of roughly zero. The average return is a marathon pace, not a promise about any single decade of your life.
How should a long-term investor hold the number '5% real'?
Plan with it, stress-test below it, celebrate above it. History rhymes; it doesn't sign contracts. 🐜
The rest of this unit
A century of crashes, recoveries and expensive lessons. Read before repeating.