how well has the US stock market REALLY done historically ?
(snip)"Discounting for price inflation, what about the U.S. stock market? If we take the Dow Jones Industrial Average as the benchmark, it was about 1,000 at its peak in early February, 1966. It is about 14,000 today. According to the Inflation Calculator of the Bureau of Labor Statistics, the dollar bought 6.5 times as much in 1966, so dividing 14 by 6.5 gives us about 2,150. So, it took 41 years for the DJIA to double in real terms. That’s about 1.9% per year. There were dividends, of course, but these were taxed as regular income. Dividends after 1982 fell to about 2% or less. If the investor was in a DJIA index fund, he paid management fees: maybe 2% per annum. (There were very few no-load index funds in 1966.) If he invested $1,000 in February, 1966, and sells for $14,000 today, he will be taxed 20% on his $13,000 increase. So, he will take away $10,400 in after-tax profits. Divide this by 6.5. We get $1,600. Over 41 years, that’s a return on investment of 1.15% per annum. In other words, the stock market investor after taxes and fees has just about nothing to show for his 41 years of doing without the use of his money.
This is not the story which the "buy and hold" cheerleaders for the American stock market tell today’s investor.
Lyndon Johnson’s Great Society gave us war, Medicare, and a vast expansion of Federal power over the economy. Economic liberty contracted. The performance of the stock market has reflected this contraction of economic liberty. There was economic growth, but it was not spectacular after 1973, when real wages grew stagnant for two decades. The stock market did not outperform general economic growth. After taxes, it did not match economic growth."(snip)
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