5 ms·

I didn't believe you, so I looked at a chart and found you are right: https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart https://www.macrotren

I didn't believe you, so I looked at a chart and found you are right: https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart https://www.macrotrends.net/1319/dow-jones-100-year-historic... And the same is basically true if you bought in 1966. What this tells me is that the Dow Jones (or stock market in general?) is not a good indicator (or even proxy) of wealth. Because GDP obviously grew immensely in both 30 years periods.

pchristensen 7y ago
DJIA is a pretty bad index. S&P 500 or an even broader market index performs much better. "Although it is one of the most commonly followed equity indices, since it only includes 30 companies and is not weighted by market capitalization and is not a weighted arithmetic mean,[citation needed] many consider the Dow to not be a good representation of the U.S. stock market and consider the S&P 500 Index, which also includes the 30 components of the Dow, to be a better representation of the U.S. stock market." - https://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average https://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average
- throw0101a 7y ago
  Vanguard no longer offers their S&P500 fund in their own employee's retirement accounts, but rather a Total Market index: * https://www.inquirer.com/philly/business/vanguard-sp-500-retirement-index-fund-20180606.html https://www.inquirer.com/philly/business/vanguard-sp-500-ret... * https://www.marketwatch.com/story/vanguard-employees-wont-have-sp-500-funds-in-the-401k-plan-2018-06-06 https://www.marketwatch.com/story/vanguard-employees-wont-ha...
seanmcdirmid 7y ago
There was a lot of anti-market sentiment after the depression that lasted a couple of generations. There are also other ways to make money than speculating in the market, actually, I would say it isn’t even the main way GDP is generated.
Excel_Wizard 7y ago
The chart shown at macrotrends does not show total return (dividends included and reinvested). The investor would have broken even much earlier. January 1929 to January 1960 shows ~25% real return without dividends reinvested and ~499% real return with dividends reinvested. https://dqydj.com/dow-jones-return-calculator/ https://dqydj.com/dow-jones-return-calculator/
- refurb 7y ago
  Exactly this. You can't ignore dividends. Based on this [1] calculator, you'd break event by 1940. [1]https://dqydj.com/dow-jones-return-calculator/ https://dqydj.com/dow-jones-return-calculator/
- perl4ever 7y ago
  Yes, but on the other hand, traditionally the point of dividends is that you don't reinvest them. You should still include them in returns though. But it seems unrealistic for anyone without perfect knowledge of the future to have reinvested every penny over 30 years including the depression, WWII, and the earliest, most paranoid part of the cold war and nuclear age.
wiredfool 7y ago
The Dow is a pretty bad index -- It's just one of the older ones. It's literally adding up the prices of 30 stocks and dividing by a divisor that's been adjusted over time as stocks are added and removed from the index. It was easy to calculate early on, and it's continued because it's famous.
- mattmcknight 7y ago
  Wouldn't the exiting and entering of companies have a negative effect on the index holder over time (as they are selling the exiting companies when they are valued low and buying the entering companies when they are valued high)?

pchristensen 7y ago

DJIA is a pretty bad index. S&P 500 or an even broader market index performs much better. "Although it is one of the most commonly followed equity indices, since it only includes 30 companies and is not weighted by market capitalization and is not a weighted arithmetic mean,[citation needed] many consider the Dow to not be a good representation of the U.S. stock market and consider the S&P 500 Index, which also includes the 30 components of the Dow, to be a better representation of the U.S. stock market." - https://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average https://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average

throw0101a 7y ago
Vanguard no longer offers their S&P500 fund in their own employee's retirement accounts, but rather a Total Market index: * https://www.inquirer.com/philly/business/vanguard-sp-500-retirement-index-fund-20180606.html https://www.inquirer.com/philly/business/vanguard-sp-500-ret... * https://www.marketwatch.com/story/vanguard-employees-wont-have-sp-500-funds-in-the-401k-plan-2018-06-06 https://www.marketwatch.com/story/vanguard-employees-wont-ha...

seanmcdirmid 7y ago

There was a lot of anti-market sentiment after the depression that lasted a couple of generations. There are also other ways to make money than speculating in the market, actually, I would say it isn’t even the main way GDP is generated.

Excel_Wizard 7y ago

The chart shown at macrotrends does not show total return (dividends included and reinvested). The investor would have broken even much earlier. January 1929 to January 1960 shows ~25% real return without dividends reinvested and ~499% real return with dividends reinvested. https://dqydj.com/dow-jones-return-calculator/ https://dqydj.com/dow-jones-return-calculator/

refurb 7y ago
Exactly this. You can't ignore dividends. Based on this [1] calculator, you'd break event by 1940. [1]https://dqydj.com/dow-jones-return-calculator/ https://dqydj.com/dow-jones-return-calculator/
perl4ever 7y ago
Yes, but on the other hand, traditionally the point of dividends is that you don't reinvest them. You should still include them in returns though. But it seems unrealistic for anyone without perfect knowledge of the future to have reinvested every penny over 30 years including the depression, WWII, and the earliest, most paranoid part of the cold war and nuclear age.

wiredfool 7y ago

The Dow is a pretty bad index -- It's just one of the older ones. It's literally adding up the prices of 30 stocks and dividing by a divisor that's been adjusted over time as stocks are added and removed from the index. It was easy to calculate early on, and it's continued because it's famous.

mattmcknight 7y ago
Wouldn't the exiting and entering of companies have a negative effect on the index holder over time (as they are selling the exiting companies when they are valued low and buying the entering companies when they are valued high)?