From the course: Understanding Capital Markets
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Risk and return in the stock market
From the course: Understanding Capital Markets
Risk and return in the stock market
- [Instructor] Have you ever wondered how much you should expect to earn in the US stock market and if you should be investing outside the US as well? These questions are common for investors. And they relate to a key idea in active markets. How much can you earn from your investments? In the historical sense, the US stock markets and bond market returns have varied widely over time. In some years, the stock market's up 20 or 30% or even more. And other years, it's down 40%. But on average, US stock returns, or equity returns as they're sometimes called, have averaged roughly 11% since 1928. Now that's a pretty good rate of return. But it hides an important fact. Returns fluctuate a lot. A one or two percent per day move is common. But the markets frequently fall at a sharper rate than they rise. So while gains might be averaging, say one percent per month for the first nine months of a year like 2018, they could…
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