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And this is a study from this book here, Investing in Stocks for the Long Term, follow me already, it's a classic on stock investing, this book will surely convince you why stocks are the investment with the highest profitability when associated with the long term. Follow me, the investor and professor in the United States, a commentator for some media outlets in the United States, and also a partner in the investment company Wisdom Investments, wrote this book and it's considered one of the best books on investing of all time, this rating was given by the Washington Post, one of the largest newspapers in the United States, and in this book he shows with historical data why the return when investing in stocks is greater than any other investment, and we're going to start this study here, initially in 21 days, but since the book has 24 chapters, I thought of doing 24 days, one chapter per day.
I wanted your opinion. We do it in mind, lunch, we do 24. If we do it in 21 days for three days, we'll have to study 2 chapters in those three days, so let's start here, before starting to study chapter one, a phrase here that It's in the preface, a phrase at the end of the preface, that says the following: history demonstrates how recently stocks have been and will continue to be the best investment for all those seeking long-term gains.
The preface also says that investing in stocks may not have the same returns as in the past, but even without the same returns, it will certainly be much better than other investments, for example, gold, dollars, US Treasury bills, US Treasury bonds. We're going to start today's study with chapter one: an argument in favor of stocks, historical facts, what is journalism about?
So let's start with a fact that happened here in the summer of 1929 when John A.R., a high-ranking financial executive at General Motors, said that one could create wealth by investing in stocks. His theory was published that if one started investing $15 every month in US stocks ( Down Jones index) over 20 years, a person would have $80,000.
That's a 24 percent annual return, quite aggressive as well. His theory, but the market was booming for a very good decade for the kidneys. The stock market was booming until 1929 before the world crisis began, the 1929 stock market crash. The market was... and he made this statement, it was published after that.
The stock market hit a new record before the crisis happened, but soon after, on October 24, 1929, known as Black Thursday, stocks suffered a significant drop, and that's when the great world financial crisis began. The New York Stock Exchange crash in October 1929 was 34 months of decline, with losses reaching 89 percent.
It 's no wonder that many people went bankrupt, some people broke down, many even committed suicide. So he was ridiculed, and his necklace was worn for years because he encouraged people to buy stocks at the peak, right? And after he made that statement on September 3rd, the stock market reached its peak, its historical landmark, it had never reached it before.
But nine months later came the financial crisis. He was highly criticized because he encouraged the population... Buying stocks at a peak right after he encouraged me, the stock market would have fallen 89 percent. Now I ask you, was the market fair to this engineer from General Motors? The answer is no.
The book and history show that investing in stocks in the long term is good regardless of when your investment plan started, whether you started at the peak or at the bottom. If you have the consistency to make monthly contributions, and this consistency is also associated with a long- term perspective, it doesn't matter if you started when the stock market was high or low.
That's why it's not fair, it wasn't fair to him, this ridicule. And I'll show you here: he said that investing $15.15 a month over 20 years would give a person 80,000 dollars, a return of 24 percent per year. It 's not quite that much, but it was a significant return. Those who invested, those who started investing at the peak, before...
and those who were very unlucky, started their stock portfolio right at the peak of the stock market before it all started. Christ was born in 1929. From there, he continued investing $15 every month. It took him less than four years to recover his capital, and even though the stock market fell for 34 consecutive months—an 89 percent drop—those who invested at the peak, even with very bad luck, still recovered their capital in less than four years.
This return over 20 years would give a return of seven points, 86 percent per year. If someone invested 15 dollars a year, starting at the peak of the New York Stock Exchange, over 20 years they would have $9,000. Even starting at the worst moment in the history of the world economy, before the crisis began—the biggest crisis—they would have $9,000, which means a return of seven points, 86 percent.
That's more than double the fixed income in the United States at the time. And those who invested those dollars for 30 years instead of 20 had a return of 12,711, or two percent. So, by the end of 1959, the person would have $60,000, 8 times more than they invested in bonds. The American treasury yielded nine times more than what was invested in American bonds, reminiscent of melted milk.
The only difference is the timeframe. And those who were afraid to invest in stocks because they thought it was too expensive, that it wasn't a good deal, didn't lose money, they didn't fail to gain because they invested in fixed income. In this book, there's a figure that's the main graph of the book, which is this one here.
This book shows the return on stocks, bonds, or the dollar over 200 years, right? Over 10 and 20 years, no, over 200 years. It's a very significant return. And who wins? Stocks with an annualized return of 6.6 percent per year, discounting inflation. Discounting inflation, preparation: 5. This 6 plus 15 would give a nominal return of 11.6, already discounted for inflation.
So this is a real return. Whoever invested one dollar in 1802 had, updated discounting inflation, in 2002 after 200 years, 704 dollars. Whoever invested one dollar in gold had four. The dollar was 52100, and someone who invested one dollar in 1802 in bonds only had 1178 dollars in 2002, 200 years later.
Someone who invested in bills only had 281 dollars. So this graph here shows that long-term stock investment—this graph here, when the dividend falls into the account, it considers it as if it were reinvesting— stocks have dividends, bonds also have dividends, the dollar doesn't have dividends, and neither does gold.
So this graph here, I'll show it again, shows why long-term stock investment is the best investment in the financial market that exists. And those who invested with ultrasound simply lost money in the short term. Stocks are volatile in the short term; fear takes over and makes people sell low, and euphoria takes over, making people buy high.
But stocks don't—I'm a million-dollar investment that has a long-term return because stocks have an upward trend line. Stocks oscillate around this trend line. Other studies have been done, which are also cited in Ivan's book. Fischer says that stocks are better than bonds only when there is inflation, and stocks yield less than bonds during periods of deflation.
This same Fischer spoke a little before the worst financial crisis of 1929. At that time, in mid-1929, stocks had reached an autistic level. This autistic level remained high, but after a while the stock market plummeted, and he was also ridiculed because he, along with another investor who was a financial executive at General Motors, John Fischer, encouraged people to buy at the peak.
This Fischer gave a lecture to improve market sentiment because before giving this lecture, investors were putting pessimism into the stock market, which is not true. What happened was that the market rose so much that it then fell by 89 percent in 34 months. Soon after Fischer made all these statements that stocks yield more than bonds when there is inflation and yield less when there is deflation.
Edgar Smith did another study and said, and it was proven, the following: Stocks have always performed better than bonds, regardless of the Senate's inflation rate. Cecconi's fraction is without inflation, and he also did another study that showed that those who invested at the peak, one day, not in the period before the stock market crashed in 1929, those who invested only once and only dividends, not monthly as proposed by Rascol, those who invested only once at the peak before the stock market plummeted, took 15 years to get their return on what was invested.
However, in the worst financial crisis in history, the stock market fell 89 percent, and in the United States it fell 89 percent. In other periods, the longest time, not counting the 1929 crisis, that a person could invest before a sharp drop was 5 years and 8 months. For example, in the 2000 crisis, those who invested at the peak of the dot-com bubble of technology companies and due to the fall took a maximum of 5 years.
And you, those who invested before a sharp drop in the crisis, had a return on their money after a maximum of 5 years and 8 months. There was another study that Eita Mah and Frank Smith did regarding industrial companies. They took a period of time and said that if they invested in 92 companies in the industrial sector—companies that were already in the market and would be regular—they would have a long-term return of 12.2 percent.
After 12 years, they repeated the study and had a return of 14.2 percent. Fisher did another study over a longer period because when these Eita Mah and Frank Smith did their study, some scholars said they didn't take the 1929 crisis into account. Their study was based on the 1929 crisis. Fisher went and did another study covering the period from 1926 to the 1929 crisis, including the Second World War, which began in 1939 and ended in 1944.
Even considering these two crises—the war and the 1929 crisis, the biggest in history—those who invested in the long term had a return of nine percent per year. So, folks, that was the summary of chapter 1. This summary took a little longer because I also introduced myself; the next ones will be quicker.
But this book here is a bible of good investing, so if you don't have this book yet, leave your email and I'll send you the PDF so you can follow along with the study. It's the same old story: study one chapter every day. I ask that you subscribe to the YouTube channel if you haven't already, share this video, like it on YouTube, and activate notifications. That's it, a hug, see you later.
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