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I follow the stock market closely hoping to make good money playing the market. I was doing some research on the stock market in comparison to putting the money in the bank or Money Market Mutual Fund.
Here is an interesting statistic. If you put $1000 in the Stock Market in a fund that matched the Dow Jones Industrial Average 10 years ago. You would have about 1230.00 today. The Dow Jones has only gone up 23% in ten years! The figure is about the same for the S&P 500. If you put $1000 in a mutual fund that mirrored the NASDAQ, your $1000 would be worth $700.
I suspect we would be better off putting our money in a high paying CD paying 4.25% and sleep better at night. (the average CD rate over the last ten years. That $1000 would be worth about $1400 and that does not even including the power of compound interest.
Last edited by Tall Model Looking Girl; 07-16-2008 at 08:16 AM..
True. Part of the problem was the huge run-up in the markets in the 1990s. The valuations of stocks, even after coming off the high of March, 2000, had no relation to their actual value.
People were feeling rich because they had access to debt money (HELOCS, CC's, 2nd mortgages) which really wasn't theirs, not access to their own profits from investments.
The wake-up call is now happening in MSM. Alternate sites have been warning about this for a few years.
They were drowned out and put down because too many people were riding the gravy train and having a good time.
I follow the stock market closely hoping to make good money playing the market. I was doing some research on the stock market in comparison to putting the money in the bank or Money Market Mutual Fund.
Here is an interesting statistic. If you put $1000 in the Stock Market in a fund that matched the Dow Jones Industrial Average 10 years ago. You would have about 1230.00 today. The Dow Jones has only gone up 23% in ten years! The figure is about the same for the S&P 500. If you put $1000 in a mutual fund that mirrored the NASDAQ, your $1000 would be worth $700.
I suspect we would be better off putting our money in a high paying CD paying 4% and sleep better at night. That $1000 would be worth about $1400 and that does not even including the power of compound interest.
What sort of rationale do you use in selecting that specific period of years? Without a doubt I can find a 10 year period that shows the exact opposite result.
Lastly, does your 1230 figure include dividends or is it only capital gains and of course taxation is different on the investments. (And don't forget any transaction costs)
Be careful doing "research" and "playing the markets". You aren't the first that has tried and unless you have a ton of training and education in the field you are just gambling. (Not to be mean but your 10 year analysis screams that you are newer to analytical work and that you should be more than a little cautious.) Don't wind up like the dot.com gamblers or the day-traders...I know several "geniuses" that lost close to 7-figures when it came apart at the end.
True. Part of the problem was the huge run-up in the markets in the 1990s. The valuations of stocks, even after coming off the high of March, 2000, had no relation to their actual value.
Yep, look at the last 6 years instead of the last 10 and the answer changes drastically. If people have a rational explanation as to why a specific grouping of 6-years, 10-years, 40-years, only looking a the 1960's or just using years ending in "3" is indicative of FUTURE RETURNS then I'm curious to hear why.
Reminds me of the episode of Cheers where one of the guys in the bar (Cliff I think) mapped out the presidents names mathematically and the next president was certain to be named Emo Snufferwocky or something like that. lol.
the question is, what kind of person buys an index fund tied to the performance of the Dow? Sector investing based on solid macroeconomic fundamentals would have you up far more than 23% over a ten year period.
the question is, what kind of person buys an index fund tied to the performance of the Dow? Sector investing based on solid macroeconomic fundamentals would have you up far more than 23% over a ten year period.
Most mutual funds have done worse than the index funds connected with the Dow Jones or S&P 500.
Actually, according to Yahoo Finance, your 23% figure does include dividends. If didn't, however, you'd be adding more than a mere 1% to the return. More like an extra 15% or so.
Quote:
Regardless the stock market is not the big money making vehicle that people make it out to be.
It's not when you buy near a high, shortly before a major bear market, then sell 10 years later, no. The fact is that the market has averaged around 10% per year. If you had bought near the highs, your 10-year return would've been worse than that. If you had bought near the lows, your 10-year returns would've been better than that. Like Mathguy alluded to, focusing on the last 10-year period alone to base your conclusions on stock market returns is silly.
One other point: If an investor had started investing 10 years ago, but dollar cost averaged into his investments (say, via a 401k), his return would have been much better than 23%.
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