It can be easily seen that the total return on equities dominates all
other assets. Even the cataclysmic stock crash of 1929, which caused a
generation of investors to shun stocks, appears as a mere blip in the stock
return index. Bear markets, which so frighten investors, pale in the con-
text of the upward thrust of total stock returns. One dollar invested and
reinvested in stocks since 1802 would have accumulated to over $12.7
million by the end of 2006. This sum can be realized by an investor hold-
ing the broadest possible portfolio of stocks in proportion to their market
value and is calculated to include those companies that do not survive.^8
By extension, the above analysis indicates that $1 million invested
and reinvested during these more than 200 years would have grown to
the incredible sum of $12.7 trillion by the end of 2006, nearly three-
quarters the entire capitalization of the U.S. stock market!
One million dollars in 1802 is equivalent to roughly $16.84 million
in today’s purchasing power. This was certainly a large, though not
6 PART 1 The Verdict of History
FIGURE 1–1
Total Nominal Return Indexes, 1802 through December 2006(^8) Analysis of survivorship biasissues in computing returns is discussed in Chapter 20.