One of my favorite investing books is Triumph of the Optimists. If you’ve ever wondered what history can teach us about the markets, this book delivers—with over 100 years of data. Written by Elroy Dimson, Paul Marsh, and Mike Staunton, it explores one simple but profound idea: over the long run, “the risk-takers who optimistically invested in equities were the group who triumphed.

Spanning sixteen countries and every major asset class—stocks, bonds, bills, inflation, and currencies—the authors deliver a global audit of market returns from 1900 to 2000. Why go so far back? Because “brief snippets of stock market history are not very helpful… to estimate the expected return, we need a long run of data.” And not just from the U.S., either. “The U.S. economy has been remarkably successful. It would be dangerous for investors to extrapolate into the future from the U.S. experience.”

So what did the authors find after a century of digging through dusty archives and reconstructing returns, stock by stock? First, equities beat bonds in every single country studied. Second, while equities were riskier than bonds or bills, “these risks were rewarded.” But they’re careful to note that the “equity premium”—that extra return for taking on stock market risk—has probably been overstated. “Our risk premia are lower than those that have been reported in previous studies,” they caution, partly because older studies suffer from “survivorship and success bias.”

Another big takeaway? Global diversification works. “Investors in most countries would have been better off investing worldwide… rather than restricting their portfolios to domestic securities.” And yet, despite the clear benefits, investors still tend to stay local—a phenomenon the authors call the “home bias puzzle.”

The book also takes a hard look at famous anomalies. The small-cap premium? It reversed after being discovered. The value effect? “Value stocks have performed markedly better than their growth-stock counterparts,” not just in the U.S., but in the UK and across other countries too.

Still, the most pressing lesson might be this: don’t count on past returns repeating. The authors warn that “high long-term returns on equities, relative to bonds, are unlikely to persist.” Investors today “embody exaggerated expectations based on an imperfect understanding of history.”

In short, if you’re planning your portfolio for the decades ahead, Triumph of the Optimists reminds you to zoom out, think globally, and manage expectations. Because in investing, the real edge belongs to the informed optimist—with the patience to look back a century and the discipline to stay the course.

You can find a copy of the book here:

Triumph of the Optimists: 101 Years of Global Investment

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