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FreeMarkets (91.80)

Quick Sad Fact

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October 07, 2009 – Comments (8) | RELATED TICKERS: GLD , ^DJI

Long term investing in America doesn't work.

FACT - at the DJIA peak in 1929 the value of the entire index was worth a little over 18 oz of gold.

FACT - today, the DJIA is worth a little over 9 oz of gold.

If 80 years isn't LONG TERM investing, I don't know what is.  Buy gold - you won't get rich, because gold is a store of wealth, but you'll do better than buying into the DJIA.

8 Comments – Post Your Own

#1) On October 07, 2009 at 10:49 AM, kaskoosek (62.84) wrote:

I doubt it.

 

You are forgetting about dividends. I thought you were a physicist. 

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#2) On October 07, 2009 at 11:24 AM, FreeMarkets (91.80) wrote:

I expected the dividend argument, but I'd rather discuss the bigger picture - that America's snapshot of its economic power, is 1/2 the value that it was only 80 years earlier.  This country's wealth and power are sadly headed in the wrong direction.

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#3) On October 07, 2009 at 11:26 AM, chk999 (99.97) wrote:

Gold is at best a store of value, but the value doesn't grow and you have security costs to hold the metal.

Compound interest is your friend if it is being paid to you. This is why dividend paying stocks in strong companies (bought at advantageous prices) beat gold over the long run. In the short run, if you can successfully trade gold for a true profit then you have a career.

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#4) On October 07, 2009 at 12:58 PM, dudemonkey (39.88) wrote:

A couple of things:

1) dividends.  I know you don't want to recognize this, but it's a fact and ignoring it means that you're not comparing apples-to-apples.

2) you're looking at the top of a massively speculative bubble to the midpoint of the 2nd biggest recession in the past 80 years.  

3)  I'd be willing to bet that a group of well-chose securities out performed gold many times over.  You may consider that out-of-scope, but the reality is that we can almost ALWAYS find one asset class that outperformed some other asset class over a carefully chosen timeline.

This whole discussion is so disingenuous that it's sad to see it on a website about rational investing.  It's something I would expect to see on a Sarah Palin fansite.

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#5) On October 07, 2009 at 12:59 PM, dudemonkey (39.88) wrote:

This country's wealth and power are sadly headed in the wrong direction.

This may be true, but the evidence that you chose to support it is misleading in a big way.

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#6) On October 07, 2009 at 2:04 PM, PdoBear (< 20) wrote:

Are the dividend crowd factoring in survivor bias and pre-dividend reinvestment program taxes? DRIP didn't always exist. And not all companies on the DOW are still in the DOW. No ETFs back then.

Surely, even with those factors, stocks as a whole have outperformed gold due to a period of mass global industrialization and population explosion.

In light of carbon caps, birth control, and resource limits (e.g. fresh water) who truly thinks we'll see such growth in the next hundred years?

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#7) On June 12, 2010 at 12:45 AM, Acesnyper (< 20) wrote:

This is only mildly pro gold, mildly.

 

While that's not always a bad thing, I'm not the hugest fan of gold. What I would like to ask is where did these facts come from? I'm not hinting at anything, I would just like to know the source of them. 

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#8) On September 09, 2010 at 10:53 PM, VictorFL (< 20) wrote:

Forget dividends. You have to have your stock holdings way above what average investor. For example, at least $100,000 account to have anything left to reinvest after trading costs. Even if you invest in ETFs the dividend AFTER the management fees is really negligible if any. All that talk about dividend reinvestment is academic cr.p to me because I know from practice. (my acc is only about $10K).

Forget about gold either. I've seen over 1000-year gold price chart. A 1000 year chart is disputable, I know. But you'll get a bigger picture of what's going on. Just google it and you'll find it. And guess what? Historically gold is losing it's purchasing power since ancient times. Especially for the last 300 years. It's because the world population grows at about 1% a year, while annual gold mining adds about 5% of gold every year. 

But in a short-term (let's say 3-5 years short-term) gold may be quite a good speculative investment. It's probably manipulated, you just have to find out why and by whom, to guess what approximately is the best time to get out. But if you're uncertain, do nothing.There will be another train soon.

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