Having suffered quite a loss in my portfolio, in the recent downturn of the NASDAQ; I have a question for all of you investment mavens out there: every investment analyst says “don’t try to time the market”. By this of course is meant that if you invest at a steady rate, you will be almost as much ahead, as if you were able to buy in at market lows 9and sell at the highs). My question: suppose you were so unlucky as to buy in just before the 1929 crash, and you held through the great depression, WWII, etc. How would you have ended up today?
The best time to buy stock is right after a crash. So, why would you want to sell stock you bought for $10 a share in Sept. '29 for 50 cents a share in Oct. '29? The market can really only go up from there.
So, how much your would your 1929, 50 cent stock be worth today? A lot more than $10, I’m sure.
I recall reading this somewhere, and I’m sorry I can’t remember the details. But the article basically said if you had invested $1,000 right before the bubble burst in 1929, and left it in there (reinvesting for dividends, adjustments for stock splits, etc.) the total would be in the hundreds of thousands of dollars today.
I understand all the words, they just don’t make sense together like that.
IIRC, the DJI was about 300 just before the crash of 1929. It bottomed out around 40 a year later. Today, its about 10500. This reflects stock sales prices and does not reflect reinvestment of dividends. Sooooo, if you bought before the crash, you’d be up by a factor of 35. If you waited until 1930-1932, you’d be up by a factor of 250.
Keep in mind that inflation has eroded those numbers by a factor of 10 (?). In terms of buying power, you would have at least tripled your money.
I just asked this question at www.askjeeves.com and it told me that the Dow Jones Index maxed out at 381.17 on September 3rd, 1929. It’s currently at 10,509.21 according to quote.yahoo.com
IE, every dollar that you had in the DJI at its peak just before the great crash would be worth $27.57 today.
(That’s before any inflation-adjustment. After adjusting for inflation, this may well be a net loss in constant dollars.)
Oops - good point. I forgot to adjust for dividends. My bad.
Not adjusting for dividends realy distorts the picture. There was a time when companies gave dividends around 3% to 6% which is a semi decent return without capitol gains.