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The Great Depression - DCA with passive indexing

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October 10, 2008 – Comments (0)

I decided to see how an investor would have fared who began investing in the stock market at its peak in 1929 and continued to invest an equal amount each following year.

Assuming the following:

Investor buys $ 10,000 of DJIA each january beginning in 1929

Dividends = 0%

Inflation = 0%

we get the following results:

5 years - Investor has 429 shares worth total of $43,660

10 years - Investor has 845 shares worth total of $124,976

15 years - Investor has 1239 shares worth total of $191,394

20 years - Investor has 1523 shares worth total of $314,639

25 years - Investor has 1718 shares worth total of $704,000

 

An investor who began DCAing in 1929 would have experienced losses in each of his first four years.  His $40,000 of investments would be worth only $15,690 at the beginning of 1933.  In the 5th year there was a bounce and his $50,000 in investments was worth $43,660 at the beginning of 1934.

 

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