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That ignores dividends. That will add a couple of percentage points to the return. If I rerun the calculation from the cherry-picked peak of about 360 in 1928,
by pg314 5y ago
That ignores dividends. That will add a couple of percentage points to the return.
If I rerun the calculation from the cherry-picked peak of about 360 in 1928, I get around 4.5% after inflation, without dividends.
- IshKebab 5y agoI'm pretty sure they use a price that accounts for dividends. Or they should anyway unless they're doing it wrong.
- roaring20s 5y agoCompounding works best when dividends are immediately reinvested... it also pushes up the total return considerably.
- cperciva 5y agoThe article says "total return", and the price index only increased by 513x (from 68.63 to 35,208). so I'm pretty sure they're including dividends.
- pg314 5y agoTrue. I missed that. The calculator at [1] gives totally different returns with dividends reinvested, though: 7.6%. [1] https://dqydj.com/dow-jones-return-calculator/ https://dqydj.com/dow-jones-return-calculator/
- roaring20s 5y agoI am including dividends. I sometimes wonder if there are some long forgotten brokerage accounts just idly compounding.
- delaaxe 5y agoThough dividends paid in cash don't really count as compounding no?
- seanmcdirmid 5y agoYou can reinvest them it or he stock after you’ve paid income taxes on them.
- actually_a_dog 5y agoThere aren’t, actually, at least not in the US. When an account has no activity on it for long enough, it gets liquidated and transferred to the state until someone with a rightful ownership claim comes forward to claim it. This is called “escheatment.” https://en.wikipedia.org/wiki/Escheat https://en.wikipedia.org/wiki/Escheat