Asked by albaquirky
Historically CD returns have been higher over the long term than the american stock market. true or false
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False.
Over long periods U.S. equities have historically outperformed CDs. Stocks earn a higher average annual return (the equity risk premium) because investors take on more risk. For example, broad U.S. stock indices have averaged roughly ~9–11% nominal annually over the 20th century to present, while short-term interest rates (what CDs roughly track) have averaged much lower (often in the low single digits). Adjusted for inflation the gap is still substantial.
Caveats: in some short stretches or high-rate environments CDs can beat stocks, and individual time windows matter. But "over the long term" the historical record favors stocks, not CDs.
Over long periods U.S. equities have historically outperformed CDs. Stocks earn a higher average annual return (the equity risk premium) because investors take on more risk. For example, broad U.S. stock indices have averaged roughly ~9–11% nominal annually over the 20th century to present, while short-term interest rates (what CDs roughly track) have averaged much lower (often in the low single digits). Adjusted for inflation the gap is still substantial.
Caveats: in some short stretches or high-rate environments CDs can beat stocks, and individual time windows matter. But "over the long term" the historical record favors stocks, not CDs.
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