Insights for Investors: Stocks, Real Estate and Treasuries Over Time

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Maurice StouseBy Maurice Stouse, Financial Advisor and Branch Manager

A review of the long-term return of stocks versus U.S. Treasuries reveals that a small number of stocks have outperformed US Treasuries and inflation going back all the way to 1926. That result can leave an investor wondering if stocks make sense to invest in at all. The same can be said for real estate as well.

The long-term return for stocks is 8 percent (without reinvesting dividends) and real estate is closer to 4 percent (not considering income). That is according to Peter Earle, an economist at the American Institute of Economic Research. That puts those two classes ahead of Treasuries and inflation, which are both closer to 5 percent and 3 percent over the same time frame. A review of gold also reveals that it has consistently underperformed stocks, as a group, as well. That leaves the investor wondering that if stocks offer the greatest potential for wealth accumulation, where might an investor put his money?

If someone is fortunate enough to have found the right stock, in the right sector at the right time, that probably resulted in outsized gains. Most investors who have accumulated their wealth with equities have done so through the buying and holding of businesses, represented by their stocks, over long periods of time. That also means sticking with a strategy until your needs, objectives, timeframe or comfort level change. We believe that investors can work toward their goals by investing in the American economy (and across the world in some cases) and across all its industries and to be careful not to over allocate to any one area.

What about trends and momentum? Many investors have seen the extraordinary return of a relatively small number of stocks thus far in 2023. Many might wonder if that is indeed the thing to do: Invest where the trends and momentum are currently. The challenge is knowing where that next trend is at any given time.

We think it is critical for investors to look at the importance of sectors, industries, individual companies (or funds of companies) and economic factors over a long-time frame. Time is the main advantage for an investor, as it takes long time periods, consistency, and a good degree of patience to see these returns. In the end, attaining any goal means building a plan and investing according to that plan and trying to lower personal biases as well as the noise from the media.

Diversification and asset allocation does not ensure a profit or protect against a loss. Holding investments for the long term does not ensure a profitable outcome.

Maurice Stouse is a Financial Adviser and the branch manager of The First Wealth Management/ Raymond James. Main office located at The First Bank, 2000 98 Palms Blvd, Destin. Phone (850) 654.8124. Raymond James advisers do not offer -tax advice. Please see your tax professionals. Email: Maurice.stouse@raymondjames.com.

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC, and are not insured by bank insurance, the FDIC or any other government agency, are not deposits or obligations of the bank, are not guaranteed by the bank, and are subject to risks, including the possible loss of principal. Investment Advisory Services are offered through Raymond James Financial Services Advisors, Inc. The First Wealth Management and The First Bank are not registered broker/dealers and are independent of Raymond James Financial Services.

Views expressed are the current opinion of the author and are subject to change without notice. The information provided is general in nature and is not a complete statement of all information necessary for making an investment decision and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results.

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