Dow 8000?

[JustCurious]

Razor, let me see if I can help you put things in perspective. In the last 100 years, we have had a major depression which lead to severe unemployment and soup lines, numerous recessions, two world wars, several regional wars (including Vietnam, Korea, Iraq I, Iraq II, Bosnia, Afghanistan), a major terrorist attack that destroyed the two tallest buildings in New York and shut down the financial markets for a week, an oil crisis in the 1970's, hyperinflation in the early 1980s, a stock market bubble that popped in 2000, a number of corporate scandals which lead to the implosion of companies like Enron and Worldcom, a savings and loan crisis which cause many S&Ls to go under, and many more economic challenges and crises, too many to mention.

And during that time, the stock market has averaged a 10% return every year.

 

[Razor]

And during that time, the stock market has averaged a 10% return every year.

You know I heard that but have never seen the data to back it up. What market are you speaking about? Some say the DOW always goes up but the DOW stocks of today are not the same stocks of the past. Whenever a DOW stock starts to flounder, it is replaced with a more robust stock. So it it a true inicator of historical gains?
The NASDAQ is half what it was in 2000, will it ever average out to 10% gain? The S&P is still down from historical highs.
Will things always get better for the rest of our time on earth?
To say the market will always go up because it always has before doesn't do it for me, I need reasons it will go up. What happens in the market for the next 10 to 20 years is what matters to me. What happened 50 years ago is irelevant.

How did the market compare to the rate of inflation throughout history?

 

[FIREd]

As Bush wisely said yesterday (quoting from a CNN Money article), "Economy has slowed."

Geez, really?? What foresight!

Recent CNN headlines (I paraphrase):
Stocks at 18 months low
Job losses: worst in 5 years
Foreclosures hit all time high
Home equity falls below 50%
Dollar at a record low against the Euro
Consumer confidence lowest on record
New recession worry: bank failures
RE Prices could fall another 10%
Inflation fears on the rise
$100 oil - Just like a recession
Bush: "economy has slowed"
Bush: gas prices closing on $4 a gallon? nobody told me...

Somebody is drinking the coolaid, but I wonder who... Bush or the Media?

 

[JustCurious]

Razor, the data to support my 10% figure is found on page 13 in "Stocks for the Long Run", fourth edition, 2008, by Jeremy Siegel, Professor of Finance at the Wharton School at the University of Pennyslvania. In that book, he shows that the Annual Stock Market Returns from 1926 to 2006 was 10.1%. Not the Dow, the stock market.

 

[Razor]

Razor, the data to support my 10% figure is found on page 13 in "Stocks for the Long Run", fourth edition, 2008, by Jeremy Siegel, Professor of Finance at the Wharton School at the University of Pennyslvania. In that book, he shows that the Annual Stock Market Returns from 1926 to 2006 was 10.1%. Not the Dow, the stock market.

So that's the entire stock market? Does that include stocks that went belly up and were delisted?

 

[Razor]

Don't Worry about Average Return for Stocks - Focus on Best Stocks for You
Don't be Misled by this Stock Cliche
Over time, the market has averaged about a 10% return annually.

How many times have you heard this statement or one like it to justify investing in the stock market? The statement is sometimes used to suggest that investing in the stock market will earn you a 10% return if you leave your money in long enough.
The problem with statements like this is that they are half-truths, often used out of context with beginning investors who don’t understand the complete truths. Problem One
The first problem is the statement suggests that you should expect a 10% annual return from your investments in the stock market. Really? Which investments?

People unfamiliar with investing may assume that buying a few (or one) stocks will set them up for this famous 10% return. I know this is true, because they e-mail me all the time when it doesn’t happen.
What Market?

The second problem is what do they mean by “the market?” It wasn’t the S&P 500 in 2004, because it didn’t return 10%.


You can buy mutual funds that track large portions of the market like the Russell 3000 or the Russell 5000, but they didn’t perform any better.

The fact is that by investing in individual stocks you are not buying “the market,” so what the market does is of little concern to you.
Your focus is on the portfolio you create and how it will perform in the future, because that’s all that matters. If you want to keep score by comparing your gains to those of some benchmark like the S&P 500, feel free to do so.
However, keep in mind investing is not about beating a benchmark. It is about securing your financial future. If the S&P 500 is up 2% and your portfolio is up 3%, that will be little comfort when you need real dollars to spend in your retirement. Conclusion

Long-term investors should focus on buying quality stocks that will meet your financial goals and let someone else worry about where their 10% went

 

[twaddle]

Have the cover stories of Newsweek or Time said we are in a recession yet? I haven't checked.

If they have, it is time to buy stocks.

Who needs Newsweek? Isn't a "DOW 8000" thread enough to tell you we've hit the bottom?

Doesn't anybody remember how this board marked the top?

http://www.early-retirement.org/forums/f28/record-dow-whee-30317.html

 

[barbarus]

Lots of whistling as we walk past the graveyard here. You know, I bet if we all just talked real positive , why, that old economy would pick right up.
Yes sir. She'd just take on off. Yup. Just like a rocket.

Lets keep telling each other how swell things are gonna be real soon now.
That'll do the trick.
Nothing much to worry about here. No room for nervous nellie or gloomy gus on this smile-train. Unless you're a booster, don't apply.



Did that work?

 

[JustCurious]

So that's the entire stock market? Does that include stocks that went belly up and were delisted?

Yes.

 

[Notmuchlonger]

Lots of whistling as we walk past the graveyard here. You know, I bet if we all just talked real positive , why, that old economy would pick right up.
Yes sir. She'd just take on off. Yup. Just like a rocket.

Lets keep telling each other how swell things are gonna be real soon now.
That'll do the trick.
Nothing much to worry about here. No room for nervous nellie or gloomy gus on this smile-train. Unless you're a booster, don't apply.



Did that work?

What do you expect people to do? Cry and say the world is going to end?

 

[unclemick]

What do you expect people to do? Cry and say the world is going to end?

The world is ending - I heard they got snow somewhere in north Louisiana.

They are making snowmen like crazy and video taping before they melt.

A sure signal to buy on the dip? Or is that a dippy rumor? .

heh heh heh - . Balanced index - stay the course for retirement money and buy a few dippy hobby stocks to keep the hormones happy.

 

[Independent]

And during that time, the stock market has averaged a 10% return every year.

I think it makes sense to say "during that time, the stock market averaged a 10% return". It would also make sense (though it's a false statement) to say "the stock market earned 10% every year". However, it doesn't make sense to say "averaged a 10% return every year".

The averages over very long periods include some extended periods when the (real) return on the market was less than zero. For example, the S&P 500 had a compound negative return for the 9 years from Jan 1999 through Jan 2008, or for the 17 years from Jan 1966 through Jan 1983.

 

[JustCurious]

For example, the S&P 500 had a compound negative return for the 9 years from Jan 1999 through Jan 2008, or for the 17 years from Jan 1966 through Jan 1983.

I don't know where you got these figures from. The 10 year average annual return of Vanguard's S&P 500 fund through February 2008 is + 3.99%.

https://personal.vanguard.com/us/funds/performance?FundId=0040&FundIntExt=INT&DisplayBarChart=false

During the same period, Vanguard's Total Stock Market Fund had an average annual return of + 4.46%.

https://personal.vanguard.com/us/funds/performance?FundId=0085&FundIntExt=INT&DisplayBarChart=false

 

[al_bundy]

when you account for inflation it's negative

 

[JustCurious]

First, all return figures are nominal. Second, the returns are positive even taking inflation into account. Inflation has not averaged more than 4% per year for the last 10 years.

 

[Bikerdude]

What do you expect people to do? Cry and say the world is going to end?

I would say this is a certainty for all of us. Some sooner than others. Sort of puts the stock market in perspective .

 

[Razor]

I move all my money I had in the stock market to a stable value fund last August. When the DOW hits 8000 I am getting back in.

 

[REWahoo]

I move all my money I had in the stock market to a stable value fund last August. When the DOW hits 8000 I am getting back in.

And if it starts from where it is today and climbs slowly upward for the next 3-4 years? What will you do then?

 

[RockOn]

I move all my money I had in the stock market to a stable value fund last August. When the DOW hits 8000 I am getting back in.

On that stable value fund, what return are you getting? Is it available to the public outside of a tax deferred plan?

 

[clifp]

Anybody else think that Dow 8000 is a really a small worry compared to.

Shadowy soldier of fortune companies getting their hands on nuclear devices and blowing dozen up cities in the US. [Jericho]
Traffic management computers becoming self-aware and destroying mankind with human looking Terminator units being sent back through time to finish the job.
If not now [Terminator: Sarah Connor chronicles] then in our great grand childrens time [Battlestar Galactica].

I guess I should strop watching regular TV and start watching CNBC to get really scared

 

[REWahoo]

I guess I should strop watching regular TV and start watching CNBC to get really scared

Any truth to the rumor that CNBC hired Stephen King as a financial commentator?

 

[Razor]

On that stable value fund, what return are you getting? Is it available to the public outside of a tax deferred plan?

Last 3 Months1.25% 1 Year4.57% 3 Year Annualized4.26%

It is JP Morgan 401K Fund. I don't know if it's available outside deferred plan. I sure slept better after I got out of stocks for awhile.

 

[dumpster56]

Lets see Opec will not raise output, crude at 106 a barrel only to continue to go up since the Arabs have figured out that they need not blow up america with bombs, but just raise the price of oil so high that we cannot pay our bills.

 

[ziggy29]

I still say all this talk about "what will happen next?" is just a powerful argument for building a diversified portfolio which thrives in good times and "survives" the bad times without ruination.

In 2000-2002, I had enough in REITs and small caps -- which performed well -- as well as gold stocks which also performed well, and in 2001-2002, I lost only 8% TOTAL in a time when the S&P was down about 35% and the Nasdaq down by more than 50%.

Even now, I have enough in bonds and gold mining funds that I'm down less than 6% compared to more than 11% for the S&P 500.

Oh, and in the up market from 2003 to 2006, I kept pace with the S&P 500 (or better) every year. I lagged it a bit in 2007 because small caps and REITs sucked, but I still eked out a positive return for the year.

If I were "all in" with one or two types of stocks, I'd worry like hell that the market would tank. If I were "all out" because of market timing and panic, I'd worry that the market would start rallying and I'd be out of it.

As it is? These aren't easy times for many people, but if you construct a diversified portfolio with a lot of non-correlating assets, chances are pretty good that you won't feel the carnage nearly as much as someone who just buys an S&P 500 index fund and nothing else.

 

[FIREd]

I still say all this talk about "what will happen next?" is just a powerful argument for building a diversified portfolio which thrives in good times and "survives" the bad times without ruination.

In 2000-2002, I had enough in REITs and small caps -- which performed well -- as well as gold stocks which also performed well, and in 2001-2002, I lost only 8% TOTAL in a time when the S&P was down about 35% and the Nasdaq down by more than 50%.

Even now, I have enough in bonds and gold mining funds that I'm down less than 6% compared to more than 11% for the S&P 500.

Oh, and in the up market from 2003 to 2006, I kept pace with the S&P 500 (or better) every year. I lagged it a bit in 2007 because small caps and REITs sucked, but I still eked out a positive return for the year.

If I were "all in" with one or two types of stocks, I'd worry like hell that the market would tank. If I were "all out" because of market timing and panic, I'd worry that the market would start rallying and I'd be out of it.

As it is? These aren't easy times for many people, but if you construct a diversified portfolio with a lot of non-correlating assets, chances are pretty good that you won't feel the carnage nearly as much as someone who just buys an S&P 500 index fund and nothing else.

I agree with what you said. Diversification is key in times like these. My self managed low corrolation portfolio (overall 65% stock / 35% bonds and cash) is down only about 6.8% from the top of the market (the S&P comparatively is down 17.4%). Compare that to my performance chasing Ameriprise financial advisor's performance: down 16.1% (80% stocks / 20% bonds and cash overall). Last year my self managed portfolio was up 7.1%, and my FA's managed portfolio was up 6.2%. As soon as I can break that VULI contract I am out of there...