is investing in the stock market a good deal?

One of the claims that used to be made was that even if you invested your money at the peak of the stock market in September, 1929 when the Dow was 381.17 you'd still come out ahead if you just kept your money invested with the stocks that make up the Dow.

With the stock market being down a bit I decided to calculate the rate of return if one invested at the peak in 1929. The Dow closed today (yesterday) at 7552.60. It's 79 years, five months. I called it 79.5 years for simplicity sake.

The rate of return for investing in the stock market in Dow stocks is a little under 3.83%. It's not bad, but it's not that much better than investing in certificates of deposit and other more conservative instruments.

Tags: DJIA, investing, rate of return (all tags)

Comments

9 Comments

Don't forget dividend payments

They more than doubled the rate of return over the period: http://www.thefinancialhelpcenter.com/St ock-Market-Pics/mini-Dividend.jpg

by Ottnott 2009-02-17 10:14PM | 0 recs
And your point is?

Need more than paragraph...

by SocialDem 2009-02-18 03:01AM | 0 recs
Nice to see a comment in the Recommended Dairies

by oc 2009-02-18 06:28AM | 0 recs
If You Could Live Forever

Most people old enough to invest in 1929 are now dead. If you were forty in 1929, you did not regain your initial investment until 1954. Moreover, the rate of return is not adjusted for inflation and furthermore, you are not counting the fees the typical investor pays to the broker or financial advisor.

In most economic studies, the great majority of investors underperforms the Dow and S&P 500 stock index averages once fees are taken into consideration. Most people who invest at the peak of a secular bull market lose out, even in the long run. That's why George W. Bush's proposal to force people to invest their social security withholdings in the stock market was one of the worst proposals ever by a president.

However, given that the secular bear market is now about ten years old and the Dow has lost almost half of its value, long-term investment in the stock market for young people is probably a good move. It's probably a good move for anyone who has more than a 20 year time horizon.

by Zzyzzy 2009-02-18 08:20AM | 0 recs
Forgot One Line

If you were forty in 1929, then you were of retirement age in 1954 (66), and thus, didn't make any money on your investments made prior to Oct. 1929.

by Zzyzzy 2009-02-18 08:26AM | 0 recs
Q: is investing in the stock market a good deal?

Yes. And No.

by QTG 2009-02-18 10:12AM | 0 recs
Re: is investing in the stock market a good deal?

If you could tell us when the market has hit its bottom, then the question could be answered. The Dow is down nearly 50% from its high, which was close to 14,000 not to long ago.

by MainStreet 2009-02-18 02:05PM | 0 recs
Re: is investing in the stock market a good deal?

The dates chosen are pretty arbitrary. (Well, actually they are not arbitrary.  They are purposely chosen to prove your point). It would be more meaningful to take an average of a number of different 80 year time periods.  For example, if you start in 1930 rather than 1929, it probably looks very different.

by markjay 2009-02-18 03:19PM | 0 recs
Re: is investing in the stock market a good deal?

The major markets are down over 8% since Hope and Change entered the picture.

Sierra Hotel.

by sierrahotel 2009-02-20 08:24AM | 0 recs

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