Past performance is not indicative of future returns.
E-mails from financial services companies often end with the tagline, “past performance is not indicative of future returns.” Nonetheless, there are many people whom have held up the 5-10% average annual return of American stock market indices to argue that this is not the case. This contradiction is often escaped by suggesting that averaging performance creates more stability. While the American stock indices have been a good investment, this is not an international truth.
Here is the performance of the Dow Jones Industrial Average
The NASDAQ
The S&P 500 Index
Things, however, looked quite a bit different in Japan. The overall economic climate in Japan has not enabled the country to recover since its crash in the 1980s. Needless to say, the Japanese stock market has not been a great investment over the past 20 years.
Here is the performance of Japan’s Nikkei 225
The case of the Nikkei may be an extreme, but it exists as a distinct possibility. Throwing a few more countries into the mix of observations may enhance our perspective:
Austria – ATX
Brazil – Ibovespa
Europe – FTSE 100
Germany – DAX
Hong Kong – Hang Seng
India – Bombay Sensex
Korea – KOSPI