In previous articles we have looked at the returns produced by the UK market over the past 25 years and investigated the likelihood of an investor achieving a positive or negative return after holding shares for 1 to 10 years. We found that holding shares in UK companies for a period longer than five years reduced the likelihood of losing money (in real terms after inflation) from around 25% over 5 years to 5-10% after 7 or 10 years. We also found that holding shares over the longer term narrowed the distribution of possible returns, as outlined in figure 1 below. The most likely outcome for a UK investor holding shares for a ten year period over the past 25 years was a return of between 4-8% per annum above inflation.
Do different developed world stock markets carry a similar degree of risk?