Comparing 20 years of stocks, oil, pension plans, housing and gold

The winner is oil, with a price boom that peaked in 2008 and could happen again. However, for an investor, investing directly in oil is problematic, leaving only oil futures or ETFs like USO, which invest in oil futures. In both cases, the issue of contango arises —the difference between the expiry prices of one futures contract and the entry price of the next— generating significant costs that will almost certainly reduce that 7.09% return, likely bringing it below the mid-range of the table.

This leaves equities (stocks) as the absolute winners in the ranking, particularly emerging markets at 7.02%, Spanish stocks (which could arguably have been considered “emerging” during part of these 20 years) at 6.76%, and U.S. stocks at 6.61%. However, it seems that dividends were not included in this ranking, so the annualized return for equities would actually be higher. For example, average dividends in Spain now are around 4%, and in the U.S. around 2%. Including dividends, Spanish equities would emerge as the top performer alongside emerging market equities.

Regarding the age-old question of what appreciates more, stocks or real estate, it appears that over 20 years, stocks have won, as housing only increased 5.32% annually. But analyzing housing price evolution is always debatable. According to the article, they compared the average housing price in 1990 with the average price in 2010, which may not be fully comparable. For starters, a house bought in 1990 is now an older property needing renovations, while the average house sold today is relatively new. Average square meters sold have also changed over 20 years. Your old house may now be more centrally located thanks to the construction boom, but the comparison is tricky and must be taken with caution. Still, the conclusion seems to favor stocks, despite their inevitable fluctuations.

Interestingly, equity pension plans have only returned 2.17%, due to the fees charged, which reduce gains below even inflation —3.37% annualized in Spain over these 20 years. However, mixed equity pension plans (with 20–30% in fixed income) have averaged a 5.72% return, which is not bad.

Another point: the Japanese stock market lost value over this period, though inflation was also negative, and property prices likely fell as well. Japan is Japan, and hopefully we aren’t fully “Japanese-izing.”

Finally, gold, even with its current boom included, has only increased about 5.94% annually over the last 20 years. Not very impressive, especially considering it might currently be at bubble-level prices.