15 Fantastic Charts From 'Triumph Of The Optimists' —One Of The Most Famous Investing Books Ever Published

triumph of the optimists

Photo: Princeton University Press

In 2002, three economics professors — Elroy Dimson, Paul Marsh and Mike Staunton — published Triumph of the Optimists, an exhaustive look at a century’s worth of investment returns.We liked it so much that we think it makes for a great Chistmas gift that any investor would love.

The authors’ believe that no one should be investing in anything until they’ve seen what world returns have looked like over the past 100 years and across multiple countries and asset classes.

“Triumph” turns out to be the tale of two half-centuries — the first half, during which returns in global markets were terrible, and the second, during which it was pretty impressive.

As the authors warn:

“…future expectations must lie below today’s optimists’ dreams. We can hope for, but we cannot expect, the optimists to triumph in the future.”

Thanks to Princeton University Press for giving us permission to feature some of the charts from the book.

World stock market returns have been robust over the last century. A $1 initial investment would have turned into $295 by 2000

The extraordinary US stock market in the past century skewed global asset returns upward

US asset real returns over given timeframes: stock market returns have been stronger in recent periods

Dollar/pound exchange rate: adjusting for inflation, the dollar and pound sterling moved hand-in-hand for much the 20th century except during wars

Here's a look at volatility, expressed as standard deviation of returns. According to the authors losing a war and/or a history of high inflation is bad for this indicator.

Most countries' stock markets are bigger than their bond markets. But a few countries, especially Denmark and Germany — skew the aggregate figure

On a risk-adjusted basis(Sharpe ratio), with just one exception, you would have gotten less volatile returns investing in a global equities fund than whatever you could invest in at home

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