Interesting calculations
cohodk
Posts: 19,105 ✭✭✭✭✭
In 1920 the high of the DOW was 100. Today is 10500. Annual return--5.3%
In 1929 (then peak of the DOW) was 381. Today is 10500. Annual return--4.2%.
In 1920 gold was $20. Today is 1180. Annual return--4.65%
In 1933 gold was $35. Today is 1180. Annual return--4.68%
Dividends are not included in the stock market returns.
Think of what has happened in the last 90 years--wars, assassinations, conspiracies, manipulations, depressions, expansions, ect.
Seems both have been a store of wealth and hedge against inflation.
I've stated before, that all asset classes have their day in the sun and in the end all have similar rates of return.
I started calculations at 1920 as this is a time frame that encompasses a period greater than most human lives.
In 1929 (then peak of the DOW) was 381. Today is 10500. Annual return--4.2%.
In 1920 gold was $20. Today is 1180. Annual return--4.65%
In 1933 gold was $35. Today is 1180. Annual return--4.68%
Dividends are not included in the stock market returns.
Think of what has happened in the last 90 years--wars, assassinations, conspiracies, manipulations, depressions, expansions, ect.
Seems both have been a store of wealth and hedge against inflation.
I've stated before, that all asset classes have their day in the sun and in the end all have similar rates of return.
I started calculations at 1920 as this is a time frame that encompasses a period greater than most human lives.
Excuses are tools of the ignorant
Knowledge is the enemy of fear
0
Comments
<< <i>Very interesting numbers. I think, in my personal opinion however, that to show a DOW from 1920-present has no bearing on what a DOW present-2100 may be though. From 1920 - present, this nation has been more prolific in manufacturing than any other civilization history has ever known....BY FAR! Today, I would wager that we manufacture less than 30% of what we did just 40 years ago....and probably much less. Its hard for me to believe that the DOW...as is...will even come close to those returns over the next 90 years as it has in the past 90 years. Just my thoughts. >>
Returns could just as easily be much greater as well. However, if you are correct, then prices of items across a wide spectrum will also remain stagnant as disinflationary forces remain strong.
I'll take a 4% return any day of the week. I'm not greedy.
10,000 invested at 4% for 40 years grows to $48,000. At 5% is $70,000, or 46% more. I use 40 years as this is generally one's working lifetime.
Knowledge is the enemy of fear
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Who guarantee's 5% returns? No one? It's all a gamble just depends what way you play
No one is making any guarantees. Point of the thread is to illustate that gold and the stock market have had similar rates of return over the lifetime of the oldest persons still living today. Can that be extrapolated into the future? Of course not.
But if I were to say in 1920 that there would be a 90% collapse in the stock market, a massive war that choked-off an huge percentage of the worlds population, a man on the moon, TV, mobile telephones, nuclear power, cure for polio, creation of massive government entitlement programs, what would you say about the future of the stock market and gold? I think the next 90 years will be just as remarkable as the previous 90.
Knowledge is the enemy of fear
<< <i>your calculations are based strictly on "buy and hold." Playing the ups and downs is where the money is made (or lost). >>
Thats why I said "all asset classes have their day in the sun ".
Knowledge is the enemy of fear
Just being contrary.
I knew it would happen.
I wonder what the numbers are from 1971 when Nixon took us off the gold standard. Dow was about 1000 then? Gold was $42?
I believe, over time, different investment vehicles do well while others do not. Now is not the time for stocks but is the time for commodities. Been that way since 2000. Maybe this cycle has 6-10 years left
"Was gold illegal to own at one time ?
Yes, in this country, from 1933 to 1974 it was illegal for U.S. citizens to own gold in the form of gold bullion, without a special license. On January 1, 1975, these restrictions were lifted and gold can now be freely held in the U. S. without any licensing or restrictions of any kind.
When were gold restrictions lifted ?
December 31, 1974 ended the era of private U.S. gold ownership restrictions which had begun in 1933. As of January 1, 1975, U.S. citizens were again free to own gold in any form, including bullion, and in any amount that they can afford, without restrictions or any federal ‘reporting’ of those holdings."
Only Gold
21st Century America will require skills and/or education for a tech based economy.
Our 25% H.S. drop-out rate eliminates them.
Another 25% don't have the cognitive or physical ability needed to hold steady employment in a demanding economy.
Another 25% don't have the initiative or wherewithal and want Uncle Sam to cover for them.
That leaves 25% with the skills/education/initiative/cognition to succeed in the 21st Century.
Numbers have been rounded for ease of communication.
If I were to add dividends then stock returns would be about 9%.
So if my assumption that all asset classes have similar returns over time, then gold sure has a lot of catching-up to do. Or maybe not--see below
What would the Dow's return be if you accounted for all of the Dow components that failed and were replaced by robust enterprises over the years?
Irrelevent to the discussion cuz if you were investing in the DOW then you would have changed your portfolio composition whenever the DOW components changed. Remember, not all those changes were to remove bankrupt companies, many, many were taken over by other companies. Industry and economies change over time, so shouldnt its representation in the stock market change as well?
So what you're saying is there is no safe haven or asset to grow investment. I'm going to cash in all my gold/stocks and buy land
I think you will find that most assets' return over time is similar to the rate of inflation. There is nothing wrong with owning gold or stocks, just be prepared for those periods when they out/underperform rival investments. These periods will come when least expected. Income producing land is always a good investment as long as carrying costs (taxes, ect) are not too high. One thing about land is they arent printing, or mining any more. And people gotta eat.
Gold was out of play for 42 years 1933 to 1975. Almost half of OP's 90 year comparison
Annual rate of return for gold since 1972 ($35) to present is about 9.7%. Has gold outperformed other asset classes during this time? Again, pretty similar to that of stocks. Is my assumption that "assets classes over time will have similar returns" flawed?
Knowledge is the enemy of fear
Altough, personally for stocks, instead of the Dow or S&P, my investment philosophy has slowly morphed into building 50% of my investment dollars into longterm positions, in inefficiently priced small stocks(no not penny stocks...ever!), NO widget makers, they must have good balance sheets and and at least 5 to 10 years of solid ROE. That is where history has shown truly outsized gains. vs almost ANY other investment options.
The downside is that there is a LOT of short term beta and if some bigger positions trying to get out, or russel 2000 selling is heavy, you will see big price drops in the short run. Some positions may even implode(take what you can get and usually never go back) Plus, because they are thinly traded in many cases, they are poor trading vehicles and you have use limit orders, diversification and patience. But overtime the rewards have been worth it.
of course, I don't expect many on this board to sell their gold and buy small stocks, if that happend... I would be worried ;~)
<< <i>In 1920 the high of the DOW was 100. Today is 10500. Annual return--5.3%
In 1929 (then peak of the DOW) was 381. Today is 10500. Annual return--4.2%. >>
What is the point of this kind of comparison? You realize, don't you, that only one stock in the original DOW index is still in there? An index that keeps swapping out the "losers" is meaningless as a broader measure of anything.
"The components of the DJIA have changed 48 times in its 114 year history.... Of the original 12 stocks forming the Dow Jones Industrial Average compiled later in 1896... only General Electric is currently part of that index."
Link.
I've listed below each of the DOW component companies from 1920. Why don't you run a comparison of the stocks in the DOW in 1920 -- assuming a total investment of $1000 -- and see where you'd end up today compared with gold? Considering that most of these companies have gone bankrupt, I doubt you would see anything approaching a 5% return (much less 9%).
American Can; Baldwin Locomotive; Texas Company; American Car & Foundry; Central Leather; U.S. Rubber;
American Locomotive; Corn Products; U.S. Steel; American Smelting; General Electric Company; Utah Copper;
American Sugar; Goodrich; Western Union' American Telephone & Telegraph; Republic Iron & Steel; Westinghouse Electric; Anaconda Copper; Studebaker Link.
what other investment can you bury in your backyard and call it a practical and sensible plan?
You dont have to pay buying/selling fees each time you need to rebalance your stock portfolio.
You dont have worry about bankruptcy or buyouts.
and ...it offers quite a rare thing in todays world ...privacy.
Groucho Marx