The Dispatch

Let the Markets Work for You

Here are a few important points to remember about the long-term benefits of owning equities based on nearly a century of data:

1. Over the long-run, investors have been compensated for bearing investment risks, enabling investors to out-earn inflation.
2. Investors demand to earn risk premiums in proportion to the underlying risks those investments bear.
3. Small caps and value stocks embed additional risk premiums above and beyond the general stock market risk inherent in U.S. large caps.
4. Long-term government bonds embed additional term premiums (i.e. interest rate risk) above and beyond holding Treasury Bills. 

Although the above graph portrays the true difference of small-value being 19 times the amount of large cap blend at the end of this investment period, for an easier view over time, here is the data in a logarithmic format: