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Past performance does not guarantee future results. You can find periods in the US stock market’s history of years, even a decade or so, where the return on the
by gymbeaux 3y ago
Past performance does not guarantee future results. You can find periods in the US stock market’s history of years, even a decade or so, where the return on the DOW was essentially 0. Look at other countries and it gets worse; Japan’s NIKKEI returned 0 between 1995 and 2020. 25 years of… dividend reinvestment I guess? Still nothing compared to the US stock market during that period.
The stock market is a circus- that’s common knowledge- yet we rely on it for retirement? Okay. That’ll work until it doesn’t.
- nradov 3y agoThe Dow Jones Industrial Average is a garbage index with components selected arbitrarily. No one in finance takes it seriously. No one can guarantee stock market returns, but over decades it's a lot safer than depending on pension contributions from a single company. And most 401(k) plans now offer target date mutual funds which automatically reduce stock exposure over time, thus reducing risk of capital loss as you approach retirement.
- danaris 3y agoWe're not talking about what people "in finance" know or care about. We're talking about regular people's retirement funds.
- nradov 3y agoWhat's your point? Regular people's retirement funds aren't invested in the Dow. They mostly use target date funds.
- gymbeaux 3y agoEven worse. If you’re using a TRD fund to stash your retirement, it will severely underperform in a bull market, and if it spares you somewhat from a bear market, well… you probably weren’t going to be able to retire on that money anyway. Then there’s the relatively high expense ratio most of those “actively managed” funds have.
- gymbeaux 3y agoI used the DJIA because Nasdaq 100 and S&P500 aren’t even 100 years old yet, so I can’t go back to 1929 or even 1945 and see how the S&P500 was doing. Dow was the only index back then that still exists today as far as I’m aware.
- nradov 3y agoThe modern US financial system has only really existed since 1971 so I fail to see the point of looking back further for retirement planning. And the DJIA is constructed in such a way that comparisons going back that far are nearly meaningless. You're just looking at noise.
- EVa5I7bHFq9mnYK 3y agoIf we are going to cherry pick, Nikkei-225 returned -6% between Dec 1989 and Feb 2023 (dividends reinvested and inflation adjusted). 33 years of negative returns.
- gymbeaux 3y agoOuch. A little worse than I thought. I never bothered to do the math with dividends and inflation adjustments.