COMMENT
The Market's 11% Return

It's the most familiar stock-market statistic in all of Fooldom: in general, shares have returned, on average, around 11% a year over the long term.

But what's not so well known is that your typical index tracker rarely produces an 11% return in any particular year. Last year came quite close; 2004 witnessed the FTSE All-Share index produce a 12% gain (with dividends reinvested). Interestingly, this year looks on course for another 'average' performance; almost six months into 2005, the FTSE All-Share has so far produced a 7.5% return (including dividends).

According to data from Credit Suisse First Boston, the market has risen two percentage points either side of 11% in just one year in ten:

Alongside 2004, previous 'average' years for UK shares since the Second World War have been 1950, 1955, 1965, 1979 and 1988. For the record, the last time that shares earned between 9% and 13% for two years running was 1943-44. Indeed, CSFB's statistics indicate the post-war years have become more of a roller-coaster ride for investors. Since 1945, shares have more often than not experienced a 15%-plus gain or fall in any given year! Read more.

So, if 2005 eventually rewards investors with what looks set to be another average performance, which way will shares turn next? Well, looking back at 1950, 1955, 1965, 1979 and 1988, all five years heralded sizable subsequent market advances. In nominal terms, subsequent three-year returns ranged from 33% to almost 100%! No guarantees, of course, but history does suggest that today's normal market returns will most likely be followed by volatile -- and upwards -- market movements.

Maynard owns iFTSE 100 shares, an exchange-traded fund which tracks the FTSE 100 index, and contributes regularly to an index tracker.