Historical Return Tool

  

Tool: Historical Return

Here`s a simple free tool to understand and view the historical return of the market. It is essential to understand to not be affraid. Lucky for us, the institute of financial planification and other sources offer freely the information of the last 50 years and even earlier. As an important note, to understand the return, we need to be concern of the devastating impact of inflation.

To access the tool, simply click the link above. It is a link to an Excel file without macros. The main goal of the tool is to give you access to the historical return data of various investments. It should help you see and understand economic valleys and downturns. See further below for more relevant information from the file.

Analysis :

There is a ton of analysis we can draw from stock market returns. It would be impossible in this short article to analyze the entire market, so here are a few insights I find interesting:

Findings: 

• Average real return (net of inflation) over the past 100 years : 
• Bonds 2%-4%; 
• Stocks around 5%-8%, 
• Real estate 2%, 
• Gold 2% 
• Inflation over the past 100 years has averaged around 3.5%, but since 1992, it's been closer to 2%. 
• Is the bonds holding better their value than equity in the short term? We know that the valley are worse in equity than bonds. However ,over the last 96 years (1928 and 2023), we got similar number of years with a loss 31% bonds  vs 33%/31% in US or CAN equity. However, after 1 year of negative return, only 30% got back in positive in bonds against 42% in equities ! 
• A reason why to use bonds in the short term is their better worst performance. Over the long term, this is false. In equity US & CAN the worst 20 years run (after inflation) is better than the bonds. This is true for lower term. For the Canadian equity the worst 4 years (après inflations) is also better than the worst bonds 4 years.  Over the 2 years range, the worst 5th percentile over 1000$ investie, we are talking of 800$ in equity vs 900$ in bonds.
• If you are flexible as to when you want to withdraw, 42% of negative years recovers for equity against only 30% in bonds. 
• Some figures are originally in USD, which I've converted to CAD, adding or removing some return due to exchange rate differences.  
• Is the past a predictor of the future ? In other words, do last year's results affect this year's?No - it is a poor predictor. 
• Rebalancing impact : Often gloated as the best thing since slice bread, it have of ten a small negative of merely about -0,03%. Since we balance Bonds, lower return, & Equities, higher return, keeping say 60% in equities means more often than not selling equities in favor of lower return bonds. Its power is not in the return!    
• The correlation between bonds and equities are low but positive. Meaning that while they more than often move independently they do not move in opposite direction. Thus lowering the rebalancing effect above. It may have been true in the past that they were uncorrelated, but this era is over. 

How to use the tool:

• Save the file to your computer. 
• Go to EN or FR tab.

Tabs:

• EN  et FR tabs Tool to view statistics 
• Graph tab Some charts on returns
• Compilation Source tab Historical return
• Calc-­> tabs (to the right of Calc) 
• Retour positif tab Checks if returns are positive after 1-5 years
• Oblig vs Actions tab Compares which would have performed better (bonds, stocks or a mix)  and evaluates the risk of financial ruin
• Retour apres x ans sans IPC tab Shows real returns (net of inflation)
• Retour mix apres x ans sans IPC tab Shows net of inflation returns for mixed asset portfolios (ie : impact du rebalancing or lack of)
• Compile +1 tab Helps with calculations
• Reference tabs (tab to the right) - All publicly accessible:
• IPQF Data Source: Contains historical returns for various indexes.
• Libra Data Source: Another data source with additional indexes Some differences exist to IPQF. Due to IPQF's more frequent reviews, I tend to trust its data more.  Copyright © Libra Investment Management Inc. 2005-2015.  All rights reserved. Data herein may be reproduced only with attribution to the copyright holder and its sources.
• Damodaran Data Source: A professor  of corporate finance at NYU Stern School of Business (http://www.damodaran.com) Offers many free historical series in USD going back to 1928!
• UStoCAN Dollar Data Source: Historical comparison table of the Canadien vs US dollar (1858-2005). Shows that the exchange rate was essentially 1:1 before 1970s.  
• Robert Shiller Data Source Table : Contains some references including data from the BlackRock target date fund. 

Glossary:

$ Current: Dollar values adjusted for inflation (real dollars)