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Interesting chart. Strange, at one point it says "High inlfation led to negative returns". When money is worth less, then you get more money when you sell some

• ksherlock 14y ago
  Inflation doesn't inflate everything at the same rate. In 1970, the DJIA was $809. 10 years later, it was $824. Inflation was more than 1%.
• zdrummond 14y ago
  Because the nature of inflation is to devalue money. For example, let's say you put $10k under your bed to buy a car for your kid when they turn 18, and let's say inflation was at 2% for those 18 years. Now the 18 years have speed buy and you go grab your very old stack of $10k from under the bed frame to celebrate your kid leaving the house. When you get to the car dealership, you find the equivalent car you could have purchased now costs $14,282. Your money has lost almost a third of it's value just by inflation.
• mikeash 14y ago
  Inflation affects the number that you use to value the worth of a company. Say you buy one share at $10 of a company with a billion outstanding shares. That company is worth, on the market, $10 billion. Let's say that next year, the company's share price is still $10. Let's also say that inflation in that period was 4%. The company is still worth $10 billion, but each dollar is worth 4% less. The company's total value has dropped. Inflation didn't cause the total value to drop. The company's value dropped for other reasons (bad sales, company president went crazy, market jitters, whatever causes these things) and inflation simply moved the numbers a bit in the opposite direction. In short: inflation doesn't affect your returns, but it affects the numbers you use to measure them.
  • itry 14y ago
    You say "In short: inflation doesn't affect your returns". And thats what I said. But the linked article says the opposite: "High inlfation led to negative returns".