Discussion in 'Sharemarket News & Market Analysis' started by oracle, 22nd Mar, 2019.
Dow Jones 1900 - 2016
Chart posted by “Jack Damn” on StockTwits…
So basically even if I'd put everything into tulips in 1637 I be ok now if I'd held my nerve?
If you had a market weighted fund that changed over time in line with market weights from tulip’s to tobacco to railways to banks to tech giants.
Nah, this time its the top!
History doesnt repeat.....does it?
Firstly that chart (as are most) is in nominal terms, not real terms.
So, for example the Dow Jones Industrial Average in real terms is lower today than what it was in 2000, even though in nominal terms it is higher. I understand the best way to adjust a chart to real terms is to price it in gold or PPI (Producer Price Index) not CPI (Consumer Price Index), as the later measure has been distorted by governments. That said, I have never seen a chart of the ASX 200 or All Ordinaries priced that way. I would like to.
Secondly, swings between extreme tops and extreme bottoms are considered by some to be normal behaviour in stock markets. Accepting this (because some people won't), then one can try to avoid the big bear markets that really wipe the value off one's assets and buy like crazy at the bottoms! Alternatively, one can ride the ups and downs and hope that when it's time to retire your nest egg is still there.
No traders who only looked at short term high returns who invested all the profits back in to future markets may have walked away with the 10% the dutch government guaranteed for Tulips, which may have been what made the prices drop that low. But if you invested in VOC who traded but reinvested (Dutch East India company) You could still of had a 3 bagger and lots of future profits even if you didn't take profits on the way up. It topped at 12 bags. The company invested its money in ships to bring more loot from the east and done very well until a war sunk its the boats 150 years later. Tulip mania is another example why you should invest in Businesses that reinvest and make sound use of capital. But back in those days you were likely to die of bubonic plague soon so short term thinking had its merits.
Can you give some data reference to this? Are you saying the Dow Jones Industrial Average all accumulation (including dividends) are lower in real terms now than 2000?
@blob2004 I will try to find something that is more up-to-date but here are some older graphs I found on the internet.
Does this include dividend reinvested?
So, if you had money in the Dow Jones 1929, you wouldn't get back to the same till 1955? And factor in inflation, you'd still be backwards.
1966 to 1983 it really looks like it went nowhere too
So making money on the stock market is a myth?
1906 to 1924 it went nowhere too.... hmmmm.....
That's why when your broker says the market always recovers you should just smile and not embarrass them. It can take a mighty long time when it's has in real terms.
See wiki Dow Jones Industrial Average - Wikipedia which explains that the nominal chart is "corrected" for stock splits and dividends. I would thus assume a chart in real terms automatically incorporates the same correction. Maybe some smarter than me can give a simple yes or no.
The DJIA does not represent a constant dollar, yes it is designed to indicate nominal share price and does not indicate the more meaning full enterprise or market value given to more modern Indexes.. It is unreliable. It is flawed. It is arbitrary decided by whatever value it is decided to give to the Dow Divisor the divisor was used to try and account for constantly changing addition or removals and the same companies going in and out distorted and gave false values. It was outdated 90 years ago hence doesn't even reflect accurately stock prices back then The divisor was originaly done on papper with a pencil for 12 stocks.
Seriously dont get how DJIA is relevent today. Surely total market index is a better measure.
Separate names with a comma.