The bottom line is that stocks may be as popular as they are because most investors, professional or otherwise, lived or worked during the period 1980-1999, which as the chart shows was the most profitable discrete 20-year period to own UK equities in 300 years. Those 8% - 10% annualised real returns never occurred during any of the prior 20 year periods cited. The entire financial services industry, in other words, may well be guilty of recency bias (investment policy by means of the rear view mirror). The key driver of future returns, of course, is starting valuation. If you buy good assets sufficiently cheaply, you will always likely do well over the medium term. Which brings us to another of our favourite charts..

Here is Tim Price's latest letter.

David Fuller's view

Here is Tim Prices's Letter.

Tim Price’s paragraph above pertains to a graphic showing over 300 years of UK stock market history in annual 20-year returns.  Over this period it significantly underperformed the UK’s 1980-1999 period, which of course covered most of the last secular bull market. 

How important is stock market history from the 17^th and 18^th centuries?  I would not dismiss any historical records and England was a global powerhouse during those two centuries.  The two most important lessons for investors from these graphs are: 1) When investing in the fixed interest sector for yield, favour the bonds of credit worthy countries which will always be able to pay back your money; 2) When investing in stock markets, the most important rule to remember is the seemingly counter intuitive – buy-low-sell-high.