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> The reason it fails is because it ignores basic psychology. What about economics, it assumes that you have a return of 5% over inflation on your investment.
by cerebrum 14y ago
> The reason it fails is because it ignores basic psychology.
What about economics, it assumes that you have a return of 5% over inflation on your investment. Is this really a good assumption?
According to this link(http://home.earthlink.net/~intelligentbear/com-dj-infl.htm http://home.earthlink.net/~intelligentbear/com-dj-infl.htm) the annual Dow Jones return adjusted for inflation and after taxes is more like 1.1%.
- marvin 14y agoIf I read this correctly, it excludes dividends (2% a year) and has taxation every year. The last point is very, very important for long term investing; you'll preferably not realize gains and pay taxes for 20 years and hence get interest and compound interest of the part of your profits that you would have paid in tax if you paid every year. In short, the chart is dishonest. (I am also surprised that is lands to far away from most other people's analysis, but I can't comment on this).